PH to borrow P205 billion in July via T-bills, bonds

MANILA, Philippines — The government will borrow P205 billion from domestic sources in July as rates remained low amid strong demand for treasury bills and bonds from investors who wanted a safe haven for their money amid the COVID-19 crisis.

In a June 25 memorandum to all government securities eligible dealers (GSEDs), National Treasurer Rosalia V. de Leon said the Bureau of the Treasury will issue P145 billion in T-bills on top of P60 billion in T-bonds next month.

The volume of IOUs to be auctioned off in July was bigger than the P170-billion program in June, although this month allowed the Treasury only eight auction dates for four weeks, while next month will have 10 auctions as the month was stretched out across five weeks.

The Treasury will sell P20 billion in treasury bills—P5 billion each in 91- and 182-day plus P10 billion in 364-day—on June 29 as well as July 6, 13, 20, and 27.

These short-dated IOUs will be issued to investors two days later, or on July 1, 8, 15, 22 and 29.

The Treasury will also offer P15 billion in 35-day debt paper on June 30, July 14 and July 28, whose issue dates will be the next day or on July 1, 15, and 29.

Also, the Treasury will auction off P30-billion each in seven- and 10-year treasury bonds on July 7 and July 21, to be issued two days later or on July 9 and 23, respectively.

The T-bond offerings in July have longer tenors than those offered during the past two months as de Leon said the Treasury wanted to “provide supply in the market” given “yearning for yields with current low rates” among investors.

Domestic borrowings will account for 76 percent of the total amount to be raised this year, which was still being finalized by the Treasury while the government assessed the funding requirements to fight COVID-19.

In a report Thursday, the Manila-based Asian Development Bank (ADB) noted that yields of government securities in the Philippines declined across-the-board during the period Feb. 28 to May 15 partly due to “investors resorting to safe-haven assets at a time of persistent uncertainty over the economic impact of the COVID-19 pandemic.”

“In an environment clad with risks, investors have become cautious by parking their money in less-risky assets such as government bonds. Increased demand from investors, as observed in the auctions, has led to higher bids and lower yields,” ADB said in its Asia Bond Monitor report for June 2020.

The string of interest rate cuts by the Bangko Sentral ng Pilipinas to keep the economy afloat amid the pandemic as well as low inflation also pulled yields of treasury bills and bonds lower, ADB added.