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Gov’t scales back domestic bond program to P120B in Dec.

THE government plans to borrow P120 billion from domestic lenders in December, less than the P140 billion targeted for this month.

In an online advisory posted on Wednesday, the Bureau of the Treasury (BTr) said it will borrow P60 billion in Treasury bills (T-bills) and P60 billion in Treasury bonds (T-bonds) next month.

For the T-bills, the BTr will auction off 91-day and 182-day paper worth P5 billion each and 364-day paper worth P10 billion on Dec. 2, 9 and 16.

It will offer three-year and seven-year T-bonds worth P30 billion each on Dec. 3 and Dec. 17, respectively.

National Treasurer Rosalia V. de Leon has said that investors remain highly liquid and interested in short tenors amid the economic uncertainty.

“The rates will trend downward for short tenors with fueled bias for the front end and high volume of liquidity,” she said via Viber this week.

Citing consistent oversubscriptions to government securities, she added investors have been taking advantage of benign inflation and record-low policy rates set by the central bank.

A trader, who asked not to be identified, said via Viber that the smaller offering might have been influenced by “thin liquidity in the market ahead of the year-end holidays.”

Meanwhile, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the Treasury reduced its borrowing to avoid enlarging the budget deficit.

“With the year winding down, the BTr opted for a smaller borrowing plan with disbursement and expenditures expected to fall as authorities look to limit the size of the budget deficit,” he said in an e-mail.

The BTr reported the budget deficit rose by 24.56% to P61.4 billion in October. This brought the year-to-date shortfall to a record P940.6 billion, up 170% from a year earlier.

In 2019, the budget deficit hits P660.2 billion. Economic managers estimated that the budget gap will hit P1.815 trillion this year, equivalent to 9.6% of gross domestic product (GDP).

“On the T-bonds, demand has waned considerably, as investors prefer to keep tenors shorter given the tenuous recovery of the Philippines,” Mr. Mapa said.

Socioeconomic Planning Acting Secretary Karl Kendrick T. Chua said he expects the economy to return to pre-pandemic levels only in the second half next year.

The economy remained in a recession as GDP contracted by 11.5% in the third quarter after the 16.9% plunge in the second quarter, according to the Philippine Statistics Authority (PSA). GDP grew by 6.3% in the third quarter of 2019.

A BusinessWorld poll of 19 economists returned a median forecast of a 9.2% decline in the third quarter.

The BTr canceled samurai and panda bond issues this year after the Bangko Sentral ng Pilipinas approved an advance credit to the national government to manage liquidity in the market.  Instead, the BTr launched a second tranche of Premyo bonds to retail investors to raise at least P3 billion. The offer period is set to run between Nov. 11 and Dec. 18.

The government wants to raise around P3 trillion this year from domestic and foreign lenders to help plug its budget deficit. — Kathryn Kristina T. Jose

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