By means of Aaron Michael C. Sy And Beatriz Marie D. Cruz, Reporters
THE PHILIPPINES is looking to borrow P310 billion from the domestic market in the fourth quarter, the Bureau of the Treasury (BTr) said Thursday, amid expectations of further rate cuts that could lower interest rates.
The planned auctions put the government on track for its full-year borrowing target, National Treasurer Sharon P. Almanza said in a Viber message.
This year’s borrowing plan is set at P2.57 trillion – P1.92 trillion from domestic sources and P646.08 billion from abroad, according to Treasury Department data.
Rate cuts by the U.S. Federal Reserve and the Philippine central bank could lower interest rates during auctions last quarter, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
He added that the lower loans are due to more vacation days during the period. “Even national government financing needs are seasonally lower in the fourth quarter, with lower government bond maturities in the holiday-shortened month and quarter, although some window-dressing activity may be seen towards the end of the fiscal year could happen.”
The Finance Ministry would seek to raise 220 billion euros from government bonds (T-bills) and 90 billion euros through government bonds (T-bonds), it said in a message on its website. In the third quarter, the BTR raised 672.5 billion euros, more than the 630 billion euro program.
In October alone, the government plans to borrow 145 billion euros: 100 billion euros in government bonds and 45 billion euros in government bonds.
The government will hold five government bond auctions next month and will seek to raise $6.5 billion at each auction through the 91- and 182-day maturities. It will also offer P7 billion worth of 364-day T-bills every week. Next month’s auctions will be held on September 30, October 7, 14, 21 and 28.
Meanwhile, BTR will look to raise $45 billion through T-bonds at three auctions for $15 billion each in October – via five-year notes on October 1, seven-year notes on October 15 and 10-year notes on October 1. 29.
In November, the government will try to raise P90 billion from the domestic market: P60 billion from government bonds and P30 billion from government bonds.
The Treasury will oFfer P6.5 billion in 91- and 182-day T-bills and P7 billion in 364-day debt at auctions on November 4, 11 and 13.
For long-term debt, the government will offer P15 billion each of 20-year T-bonds on November 12 and five-year notes on November 26.
In December, the Ministry of Finance plans to raise 75 billion euros on the domestic market: 60 billion euros through government bonds and 15 billion euros through government bonds.
The BTR has planned four government bond auctions in December. It will sell P5 billion each in 91-, 182- and 364-day T-bills in each of the auctions on November 25, December 2, 9 and 16. It will also sell P15 billion worth of 10-year bonds on December 10.
Finance Secretary Ralph G. Recto, a member of the central bank’s Monetary Board, has said that they aFFord would cut rates further and match the size of the Fed’s rate cuts, Reuters reported.
“The Fed cut rates by 50 basis points (bps). I think we can also do half a percent,” Mr Recto told a news briefing this week.
The Fed began cutting rates on September 18, with a larger-than-normal cut of half a percentage point, which is likely to be followed by a 25 basis point cut in both November and December, a Reuters poll shows .
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. earlier said there is room for another rate cut this year. The next meeting of the BSP is on October 17.
Slow downFThis allowed the central bank to lower its policy rate by 25 basis points to 6.25% in August. Ffirst rate cut since November 2020, ahead of major central banks, including the Fed.
In the short term, the lower borrowing plan for the fourth quarter could push yields lower unless the government issues unplanned loans such as government bonds, a trader said in a text message.
Ms Almanza has said the BTR has yet to decide whether it will issue more government bonds for private individuals this year.
“So far our auctions have been successful and we have raised much more domestically, so it will depend on theFcit,” she said on September 17 in mixed English and Filipino. “We don’t really have to Fill in the programmed loans for this year… So for better management of costs and debtsvice, we don’t have to borrow everything.”
The government last issued government bonds in February, when it raised a record P584.86 billion at a coupon rate of 6.25%.
The trader also noted that the fourth quarter borrowing schedule is almost identical to the planned maturities during the quarter.
The government borrows from the local population and foreign sources to help finance the budget deficit, which is limited to P1.48 trillion or 5.6% of economic output this year.
DEBT/GDP RATIO
Meanwhile, the Philippine household debt-to-gross domestic product (GDP) ratio fell to 12.1% in the second quarter from 13.2% a year earlier, indicating “stable” liability management, the Institute of International said Finance (IIF).
This was lower than the average of 47% for emerging markets in Asia and the global average of 60.9%, the report said.
For non-financial companies, the debt-to-GDP ratio also fell to 26.8% in the three months ended June, from 28.7% a year ago. The Philippine public debt fell slightly from 56.9% to 56.8% of GDP.
Debt in the Philippines FThe financial sector also fell to 7.6% of GDP from 8.8% a year earlier, the IIFC said.
The institute’s Global Debt Monitor looks at debt levels across sectors in mature and emerging markets.
Richard Francis, Fitch Ratings senior director and co-director for the Americas, said the Philippines’ stable debt outlook continues to be supported by growth.
“There are some challenges, but I think another important factor is that growth has actually supported the rating of the Philippines as well,” he told a virtual news briefing on Wednesday evening.
In June, Fitch Ratings affirmed the Philippines’ “BBB” investment grade rating and maintained its “stable” outlook. A ‘BBB’ rating means that an economy can pay its debts.
Philippine economic growth averaged 6% in the first half, falling at the lower end of the government’s target of 6-7%.
Christian Kopf, head of Fixed Income and Currencies at Union Investment Group, said the Philippines can manage its debt given its low financing costs.
“The Philippines is a country that is doing a very good job in its investor relations programs… and I think this is also reflected in the form of very low borrowing. costs,” he said during the briefing.
Leonardo A. Lanzona, an economics professor at Ateneo de Manila University, said debt still takes up a large portion of the country’s economic output.
“While the public debt-to-GDP ratio may have fallen slightly, it remains a dominant factor in the system, with debt exceeding 50% of GDP,” he said in a Facebook Messenger chat.
“Emerging economies are expected to have lower debt-to-GDP ratios because they generally have less borrowing capacity and need to avoid excessive debt to maintain investor confidence,” he added.
Treasury data shows that the Philippine debt-to-GDP ratio will rise to 60.6% by the end of 2024. This percentage is expected to drop to 60.4% in 2025, 60.2% in 2026, 58.4% in 2027 and 56.3% in 2028.