Outstanding local IOUs climbed to new high of P 7.85T in Sept

Continued dependence on domestic borrowings to finance the prolonged fight against COVID-19 hiked the amount of outstanding locally issued IOUs to a new high of P7.85 trillion in September.

The latest Bureau of the Treasury data on Friday showed that the face amount of outstanding treasury bills and bonds further climbed from P7.68 trillion in August.

Outstanding treasury bonds jumped to P6.91 trillion last month from P6.72 trillion in August, while about P20 billion in short-dated T-bills that matured reduced the outstanding volume to P942.5 billion from August’s P963.5 billion.

The Treasury plans to raise P200 billion from the weekly auction of government securities this month, but last week saw partially awarded reissued seven-year bonds as inflation jitters jacked up investors’ bid rates.

National Treasurer Rosalia de Leon had said bond rates may rise alongside the central bank’s expectations of above-target headline inflation this year, but the Treasury still had ample cash buffers so it could reject expensive tenders.

In a report last week, think tank Moody’s Analytics noted that 10-year bond yields in the Philippines rose by 12 basis points (bps) during the first three weeks of September, reversing the previously declining trend.

Higher yields were also observed in Indonesia, Malaysia, South Korea and Thailand during the same period, Moody’s Analytics economist Shahana Mukherjee said.

“More recently, at least two additional factors have contributed to these changes. The hawkish tilt by the US Federal Reserve on its quantitative easing program sent the 10-year US Treasury yield above 1.5 percent. This, combined with rising inflation concerns, contributed to the selloff in Asian treasuries,” Moody’s Analytics said.

The government had programmed to source P2.49 trillion or 81 percent of its P3.07-trillion total borrowings for this year from the sale of T-bills and bonds.

Domestic borrowings not only reduced foreign exchange risks but also took advantage of excess liquidity in the local financial system.

—Ben O. de Vera INQ