The Bureau of Treasury will be issuing treasury bills and bonds worth P200 billion this July to fund its budget deficit, capped at over 7 percent of the gross domestic product this 2022.
With the peso at its weakest, it would cost the country more to borrow from abroad. Which is why next month, the government will borrow locally around P200 billion to fund its priority programs and expenditures.
The Bureau of Treasury said it would borrow locally only P200 billion, or 20 percent less than the P50 billion it borrowed in June when it only raised P151.31 billion from the local market.
The bureau is expected to hold auctions for P60 billion of Treasury bills (T-bills) weekly. Treasury bond auctions are projected to raise P140 billion.
The Treasury said it would offer P5 billion worth of 91-day, 182-day and 364-day T-bills on July 4, 11, 18 and 25.
For its long-term tenors, the Treasury is expected to raise P35 billion in four-year T-bonds on July 5; P35 billion in seven-year instruments on July 12; P35 billion in 10-year debt on July 19; and in 14-year bonds again on July 26.
The 14-year bond would be offered due to “lack of longer tenors,” National Treasurer Rosalia V. de Leon told reporters.
Bond traders said the borrowings for July might have been cut due to fewer auction dates.
The smaller offering was brought about by government “front loading” before the national elections, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., told Business World.
The government is also taking measures to improve the country’s fiscal performance by focusing on tax collections as it reopens the economy amid a coronavirus pandemic, he said.
In May, the National Government’s budget deficit narrowed by 26.72 percent to P146.8 billion from a year earlier.
Revenues rose by 18.9 percent from a year earlier to P304.9 billion, while expenditures fell by 1.1 percent to P451.7 billion.
“I think the general sentiment is curious especially with the choice to issue an off-the-run series to start the month, as well as to issue a 14-year tenor in the week we expect the US Federal Reserve to hike by 75 basis points,” a bond trader said.
At its latest meeting in June, the US Fed increased the benchmark interest rate by 75 bps, the biggest since 1994, to battle inflationary pressures.
The government borrows from local and external sources to help fund a budget deficit capped at more than 7 percent of the gross domestic product for 2022.
The National Government has a gross domestic borrowing program of P1.91 trillion this year. Of this amount, T-bills are expected to bring in P52 billion, while the fixed-rate T-bonds are estimated to raise P1.86 trillion.
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