November 30, 2023


World Business Inquiries

More debts: Treasury to borrow P170B through T-bills, bonds in June

3 min read

The Bureau of the Treasury will borrow from domestic sources at least P170 billion through the sale of government securities in June amid expectations of strong demand, as shown by the full award of P30 billion in T-bonds on Wednesday (May 27).

In a May 26 memo to all government securities eligible dealers (GSEDs), or the government’s accredited securities sellers, National Treasurer Rosalia V. de Leon said the Treasury will offer P20 billion in treasury bills—P5 billion in benchmark 91-day, P5-billion 182-day, and P10-billion 364-day—on June 1, 8, 15 and 22.

The Treasury will again sell P15 billion each in 35-day T-bills on June 2 and 16.

For treasury bonds, P30 billion in three-year tenor will be offered on June 9, and another P30 billion in five-year tenor on June 23.

“We have extended curve to three to five years with appetite on this segment for yield pick up. We retained 35-day to provide additional liquidity layer and we are just rolling it over,” De Leon explained.

The domestic borrowings program for June was the same amount as in May.

At Wednesday’s auction, reissued five-year T-bonds with a remaining life of four years and four months were sold at 2.676 percent, below previous and secondary market rates, the Treasury said in a statement.

The auction was nearly four times oversubscribed, as bids amounted to P118.4 billion. To date, this treasury bond series had an outstanding volume of P100 billion.

De Leon said the Treasury opened its tap facility window to sell another P20 billion of these five-year bonds to the 11 GSEDs-market makers.

Last Tuesday (May 26), the Treasury accepted an additional P10 billion in 364-day T-bills via tap, as tenders reached P32.9 billion.

In a May 20 report with a long title, Oxford Economics head of strategy services and global emerging market research Gabriel Sterne said “the capacity of domestic markets to fund domestic borrowing has risen sharply in recent years, dwarfing increased government funding requirements in 2020 in Malaysia, the Philippines and India.”

Last Tuesday, Finance Secretary Carlos G. Dominguez III said the government planned to borrow more from foreign and domestic sources to offset projected forgone revenues from the proposed Corporate Recovery and Tax Incentives for Enterprises Act (Create).

If passed by Congress next week, Create will cut the corporate income tax rate—currently 30 percent and the highest in Asean—to 25 percent in July.

While revenue losses had been estimated to hit P42 billion this year—at a time when tax collections were low amid a recession, on top of P625-billion losses seen in the next five years, Dominguez said he was optimistic that firms would instead reinvest their tax savings to revive operations post-pandemic.

In touting Create, Dominguez said the Department of Finance (DOF) pitched the first-ever revenue-eroding tax package to serve as the country’s “largest fiscal stimulus program for enterprises.”

Edited by TSB

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