MANILA, Philippines—A P540-billion short-term loan from the Bangko Sentral ng Pilipinas (BSP) to the national government raised outstanding government debt to a new high of P10.33 trillion in January 2021.
Including the amount that the BSP advanced for budgetary support, local borrowings still accounted for the bulk, or 71 percent, of total debt as the government gave priority to the domestic market as loan source because it was less risky and oozing with cash.
In terms of cost and risk, “the debt portfolio reflects minimal exposure to interest rate volatility,” the Bureau of the Treasury said in a report on Tuesday (March 2).
The Treasury said as of end January 2021, “only 9.56 percent of the debt stock is subject to refixing.” This limits “exposure to a rising interest rate environment,” it said.
“Average residual maturity of 7.55 years is within the seven-to-10-year target,” the Treasury said.
“The debt portfolio’s average maturity moved slightly lower from the end-2020 level of 7.57 years as market appetite remains subdued,” it said.
“Average residual maturity for domestic and external debt is at 5.37 years and 12.49 years from 5.45 years and 12.14 years as of end-December 2020, respectively,” it added.
In all, the government in January borrowed a net of P630.87 billion domestically from the BSP and the Treasury’s weekly T-bill and bond auctions.
Domestic debt rose 9.4 percent month-on-month and jumped by a faster 43 percent year-on-year to P7.33 trillion in January.
Outstanding foreign debt declined by 3.2 percent month-on-month to P3 trillion as of January, although it was 13.7-percent bigger than a year ago.
The Treasury attributed the decline in external debt due to weaker third currency, like the Japanese yen and EU’s euro, where the Philippines has bond holdings, against the US dollar.
A weaker peso, which ended in January at 48.076 to a US dollar from 48.021 in December added P3.55 billion to US dollar-denominated loans.
“The share of local currency debt increased to 71.53 percent as of end-January from 69.42 percent at the end of 2020,” the Treasury said.
“Broken down, US dollar, Japanese yen, euro and other currencies contributed 21.81 percent, 4.22 percent, 1.94 percent and 0.5 percent, respectively, representing foreign currency debt,” the Treasury added.
It also noted that the weighted average interest rate (WAIR) at which the government borrowed remained “stable” and even declined to 4.13 percent in January from 4.17 percent in December and 4.95 percent in 2019.
In the case of domestic fund-raising through the Treasury’s auctions, average interest rates dropped to 2.63 percent in January from 3.1 percent in December 2020, the Treasury said.
However, Metrobank Research noted in a report on Tuesday (March 2) that local bond yields were on the rise since last week due to a selloff in emerging markets like the Philippines at a time of rising US treasury yields.
Last week, “yields rose by 6-70 basis points on a steepening fashion as local bonds continued to track the upward move on global bond yields—securities in the seven-year bucket and longer continued to feel the brunt of the rout as levels in this sector cheapened by at least 40 bps,” Metrobank Research said.
“News of additional supply in the seven- and 10-year buckets this March initially sparked the move higher,” Metrobank Research added, referring to the P30 billion each in T-bonds that the Treasury will auction off during the month.
For Metrobank Research, “the lack of any real and sustainable demand for local bonds may continue to put upward pressure on yields in the short-term,” although it said maturing bonds worth P193 billion this month may temper rising rates.
The Treasury had programmed to borrow P160 billion locally this month, while it also offered three-year retail treasury bonds (RTBs) to small investors until Thursday, March 4.
For 2021, the national government will borrow a gross amount of P3.03 trillion, of which P2.58 trillion will be from the domestic debt market, while foreign borrowings will amount to P442.4 billion.
These additional borrowings would further jack up outstanding debt to over P11 trillion by yearend.