Gov’t to borrow P135B in 4th quarter

The government will borrow P135 billion from the local market in the fourth quarter through the issuance of treasury bills and bonds.

In a Sept. 28 memorandum, the Bureau of the Treasury said it would auction off P60 billion in bills and P75 billion in bonds during the last three months of the year.

The government had also programmed to sell P135 billion in debt paper for each of the first three quarters.

For the treasury bills, P8 billion in 91-day, P6 billion in 182-day and P6 billion in 364-day IOUs will be auctioned off in the next three months. The auction dates for the bills will be on Oct. 5, Nov. 2 and Dec. 7.

As for the bonds, the Treasury will sell P25 billion in three-year debt paper on Oct. 20, P25 billion in five-year IOUs on Nov. 18 and P25 billion in five-year bonds on Dec. 15.

The latest Treasury data showed that as of August, the value of outstanding debt paper issued by the national government slightly declined to P3.86 trillion as more bonds matured that month.

The borrowing program for this year is 75-percent domestic and 25-percent foreign.

In January, the government borrowed offshore through the sale of $2 billion worth of 25-year bonds at a record-low rate of 3.95 percent.

Last September, the government also accepted P237 billion in illiquid state debt paper to be swapped with new benchmark bonds due in 2025 and 2040. The government launched a domestic debt swap in August to inject more liquidity into the market amid external volatility.

At the latest auction of bonds last week, the government rejected all bids for the reissued 10-year paper due to lack of demand and after banks sought yields higher than those in the secondary market.

The Treasury was looking at raising up to P25 billion in offering the reissued long-term notes with a remaining life of six years and 11 months. The bonds were first issued in September 2012 with a rate of 4.75 percent.

Had the government accepted the bids, it would have been forced to accept an average rate of 3.773 percent. Although slightly higher than the 3.725-percent yield on the 10-year securities in the secondary market before the auction, it was 27.2 basis points higher than the previous average rate of 3.5 percent. The bonds were also undersubscribed, with only P13.37 billion in tenders.

The government can afford to reject unwanted bids since it does not need to borrow because of its healthy cash position.