Government sets P180 billion domestic borrowing program for July

MANILA, Philippines — The government targets to borrow P180 billion from the local debt market next month in the hope of favorable yields as the central bank sustained its interest rate hike pause.

In a memorandum to all government securities eligible dealers yesterday, the Bureau of the Treasury said it would auction off P15 billion each in T-bills for the four Mondays of July.

For the long-term debt securities, the Treasury plans to raise P30 billion each in T-bonds for four Tuesdays of July for a total of P120 billion.

The July program is three percent lower than the P185 billion borrowings programmed for this month. The Treasury, however, raised only P172.989 billion or 94 percent of the intended amount.

This month, the Treasury raised P47.989 billion in T-bills and awarded P125 billion in T-bonds.

Interest rates were mostly on an upward trend for both short and long term securities in anticipation of the policy moves by the US Federal Reserve and the Bangko Sentral ng Pilipinas.

The BSP kept the overnight reverse repurchase facility at 6.25 percent. This is the BSP’s second pause after raising key policy rates nine times since May last year for a total of 425 basis points.

Meanwhile, the Treasury yesterday fully awarded P25 billion for the reissued 10-year T-bonds with a remaining life of nine years and two months. This was the last T-bond auction for June.

During yesterday’s auction, the nine-year T-bonds fetched an average rate of 6.243 percent, picking up by 5.7 basis points from the 6.186 percent BVAL Reference Rate, which is the standard for securities.

Rates went from a low of 6.18 percent and a high of 6.275 percent.

Nonetheless, yesterday’s average rate was lower than the 6.75 percent coupon rate when the T-bonds were first issued in September 2022.

At that time, rates were higher at 6.703 percent but the government still awarded P35 billion.

It was reissued again six times since then with rates ranging from a low of 5.732 percent and a high of 6.378 percent.

Demand for yesterday’s securities attracted P48.73 billion bids, oversubscribing the auction by 1.95 times.

Bids slipped by 35 percent from the last nine-year auction where offers reached P74.843 billion.

The latest offering has a maturity date of Sept. 15, 2032.