THE Bureau of the Treasury fully awarded P15 billion in Treasury bills (T-bills) as rates were relatively unchanged despite expectations that the country’s inflation for August will breach the government’s target band.
The auction was almost four times oversubscribed as the tenors attracted total bids of P56.9 billion. Rates were all below the secondary markets.
National Treasurer Rosalia V. De Leon said on Monday the market took its cue from the US Federal Reserve and after US jobs data for August failed to meet expectations.
“Good participation with rates relatively unchanged even as August inflation expected to breach target. Market taking signals from [Fed Chairman Jerome H.] Powell and jobs report paled in comparison with expectation,” De Leon told reporters.
Last week, the Bangko Sentral ng Pilipinas said it expects an inflation rate of 4.1 to 4.9 percent, citing higher prices for liquefied petroleum gas, Meralco electricity and key food items amid the depreciation of the peso. The Philippine Statistics Authority is set to release the country’s inflation data for August today, September 7. Jonathan Koh of Standard Chartered Bank said he expects consumer price index (CPI) inflation to have risen to 4.4 percent year-on-year from 4.0 percent in July, “with the base effect slightly more favorable in August.”
Meanwhile, reports have noted that the disappointing US jobs data could delay the US Fed’s plan to taper its bond purchases.
Rates for the 90-day T-bills averaged 1.078 percent, a tad higher than the previous rate of 1.077 percent. Bids for the security amounted to P14.38 billion, nearly thrice the P5-billion offering.
The 182-day T-bills posted the same average rate as that of the previous auction at 1.405 percent. It garnered total bids of P21.34 billion, more than four times the P5-billion offer. As for the 364-day T-bills, the tenor fetched a lower average rate at 1.609 percent, 0.7 basis points down from 1.616 percent. Tenders for the debt paper reached P21.185 billion, more than quadruple the volume offered.
For this month, the Treasury is set to borrow a total of P250 billion from the local debt market, higher than the P200 billion program in August.
Broken down, P175 billion will be raised through auctioning off Treasury bonds while the remaining P75 billion will be generated via the sale of T-bills. This year, the national government programmed to borrow a total of P3.1 trillion, of which around 75 percent is expected to be raised through domestic sources.
The government borrows to meet its spending requirements as well as to finance its budget deficit.
The economic team sees the national government’s budget deficit this year to reach P1.86 trillion or 9.3 percent of gross domestic product, even higher than the P1.37 trillion or 7.6 percent of GDP in 2020. In 2019, the budget deficit stood at P660.2 billion or 3.4 percent of GDP.
Also, the national government’s outstanding debt this year is also expected to reach by the end of this year to balloon to P11.73 trillion, up by 19.8 percent from P9.795 trillion in 2020. This is also projected to further swell in 2022 to P13.42 trillion.
As of end-July this year, the national government’s outstanding debt has already piled up to a new record-high of P11.61 trillion, swelling by 26.7 percent from P9.16 trillion a year ago.
Finance officials forecast the debt-to-GDP ratio this year to further rise to 59.1 percent and peak next year at 60.8 percent—slightly above the internationally accepted threshold—before gradually tapering off to 60.7 percent and 59.7 percent in 2023 and 2024.