Treasury to borrow lower P70B via debt papers in December

National Treasurer Rosalia de Leon. INQUIRER FILE PHOTO

MANILA, Philippines—To keep the national government’s debt ratio below 60 percent by yearend, the Bureau of the Treasury has reduced the weekly volume of debt paper it will auction off in December and plans to raise a total of only P70 billion next month.

In a Nov. 24 memorandum to all government securities eligible dealers (GSEDs), National Treasurer Rosalia de Leon said the Treasury will offer P10 billion in short-dated T-bills — P2 billion in the benchmark 91-day, P3 billion in 182-day, and P5 billion in 364-day — on Nov. 29 as well as Dec. 6 and 13. In previous months, the weekly treasury bill volume was P15 billion, with P5 billion each offered across the three tenors.

For fixed-rate treasury bonds, P20 billion each in 10-year and seven-year IOUs will be sold on Dec. 7 and 14. The Treasury had been selling P35-billion worth of bonds per auction prior to December.

De Leon on Thursday (Nov. 25) said fewer auctions were scheduled for December as the Christmas holidays drew close.

“Moreover, given that we have been seeing strong demand for our ongoing RTB issuance, we have the room to scale down our December auction sizes, especially the T-bills as this will allow us to lengthen our domestic average residual maturity,” De Leon said. The ongoing sale of 5.5-year RTBs will end on Friday (Nov. 26) with settlement on Dec. 2.

Also, “the reduction in our December borrowing program will ensure that we remain within our annual borrowing program and maintain our debt-to-GDP [gross domestic product] at sustainable levels,” De Leon said.

As of end-September, the national government’s debt-to-GDP further climbed to a 16-year high of 63.1 percent, above the 60-percent level deemed by credit rating agencies as manageable among emerging markets like the Philippines. During the first nine months of 2021, the 27.2-percent year-on-year jump in obligations outpaced the 4.9-percent average real GDP growth.

The debt-to-GDP ratio, which reflected an economy’s ability to repay its obligations, had been programmed to end 2021 at 59.1 percent, as the national government’s outstanding debts were expected to settle at P11.73 trillion by yearend.

For 2021, the government had programmed to borrow a gross amount of P3.07 trillion, of which locally sourced borrowings through T-bills and bonds would account for the larger P2.49-trillion chunk. As of end-October, gross domestic financing already hit P2.23 trillion, the latest Treasury data on Thursday showed.

De Leon had said the Treasury had no target volume for the Duterte administration’s ninth and the government’s 26th overall RTB sale, as this latest offering won’t be a “jumbo” issuance like prior fund-raising from these IOUs aimed at small investors.

While previous RTB offers attracted strong reception, De Leon had said the Treasury “will have to close our eyes to tempting demand” to not exceed this year’s domestic borrowing program.

During last week’s rate-setting auction, the Treasury raised an initial P113.5 billion from RTBs maturing in 2027. De Leon said the Treasury sold nearly P300 billion in RTBs as of Thursday.

Treasury officials last week said they would no longer offer “premyo bonds” — securities that qualify bond holders for raffle prizes — this year.

“It also takes a lot of preparation to have the premyo bonds — you have to get willing and generous donors,” said Robert Dominick Mariano, Treasury director, at an online treasury bond roadshow. “I think we’re at the tail-end already of the financing program of the national government. The window is virtually closed on another premyo bond offering for this year,” Mariano said.

Referring to RTBs being sold at a coupon rate of 4.625 percent per annum, Mariano said “this will practically be the last retail offering that we will have for this fiscal year.”

In another roadshow, De Leon said the Treasury was looking at offering premyo bonds early in 2022.

First offered in 2019, a record P6.56 billion in one-year premyo bonds were also sold in December 2020, which will mature next month.

Investors not only earned interest but also had the chance to win cash and non-cash prizes during the quarterly premyo bonds raffle draws.

Sold at only P500 per bond, premyo bonds give holders entries to win up to P1 million during the grand raffle draw, plus cars and condominium units, as in the case of the first offering.

Tycoons and property developers had donated the non-monetary prizes to attract more investors and boost premyo bond sales.

TSB