Government to borrow P735 billion from local debt market in Q2

MANILA, Philippines — The government will borrow P735 billion from the domestic debt market in the second quarter amid hopes of more favorable interest rates.  

In a memorandum to all government securities eligible dealers, the Bureau of the Treasury said it intends to raise a total of P735 billion from both short-term T-bills and long-term T-bonds from April to June. 

Broken down, the BTr will auction off P325 billion in T-bills through the 91, 182 and 364-day tenors. It will also raise P410 billion from T-bonds with maturities of three to 25 years.

The Treasury holds the auction of short-dated T-bills every Monday and T-bonds every Tuesday.

The second quarter borrowing plan is 17-percent higher than the P629 billion program in the first quarter.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the increased borrowings are a function of the national budget that must be financed by borrowings through the issuance of government securities. 

He said there is a need to prudently hedge amid some market uncertainties related to US President Donald Trump’s higher import tariffs and other protectionist measures. 

“This could lead to higher US inflation that, in turn, could lead to fewer Fed (US Federal Reserve) and BSP (Bangko Sentral ng Pilipinas) rate cuts,” Ricafort said. 

For the coming months, the economist said Fed moves would likely be matched locally by the central bank. 

Last week, the Fed kept interest rates unchanged, but still pencilled in two rate cuts for the rest of the year. However, the Fed turned pessimistic on inflation and economic growth largely due to Trump tariffs. 

On the domestic front, the BSP will hold its policy meeting on April 10.

The central bank is widely expected to deliver a rate cut after it deviated from the consensus and kept borrowing costs unchanged at 5.75 percent last month. 

Just this week, BSP Governor Eli Remolona Jr. said there is a good chance that the Monetary Board will cut by 25 basis points in April.

The government borrows heavily from domestic and foreign creditors to finance the country’s budget deficit as it continues to spend more than what it earns.

Sourcing from the domestic market is part of the administration’s debt management strategy and its initiatives to further develop the domestic capital market.

As of January, the country’s outstanding debt settled at its highest level to date of P16.31 trillion.

Majority or 67.9 percent of the debt pile were domestic borrowings and the remaining 32.1 percent were sourced externally.