Strong demand, lower yields prompt full award of T-bonds
The Marcos administration was able to raise its target amount of P30 billion during its first sale of Treasury bonds (T-bonds) for this year on Wednesday, thanks to robust demand and lower borrowing costs.
Auction results showed the new three-year T-bonds attracted total bids amounting to P53.3 billion, 1.8 times bigger than the original size of the offer.The healthy demand plus cheaper rates sought by lenders allowed the government to fully award the debt securities.
The Bureau of the Treasury said the T-bonds fetched an average rate of 5.90 percent, lower than the 6.22 percent seen in the last auction of three-year T-bonds on Sept. 5, 2023.
The yield was also slightly cheaper than the 5.92 percent quoted for the comparable tenor in the secondary market as of Jan. 2.
Rates fell despite the recent hawkish signals from the central bank. Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. last month said the central bank would only consider cutting its policy rate if both price growth and inflation expectations are in a “comfortable” range.
This, amid the threat of a prolonged El Niño weather phenomenon which may jack up food and power costs this year.
Documents from the budget department showed the Marcos administration is planning to borrow P1.85 trillion onshore in 2024.
Of that amount, P51 billion will be raised via Treasury bills while P1.8 trillion will come from weekly auctions of T-bonds.
Those borrowings are needed to help plug a projected budget hole of P1.39 trillion this year, which is equivalent to 5.1 percent of gross domestic product (GDP).Based on forecasts, it is only in 2027 that the budget deficit, as a share of the economy, is expected to return to the prepandemic level at 3.2 percent.
By the end of President Marcos’ term in 2028, the deficit-to-GDP ratio is predicted to hit 3 percent.
The anticipated implementation of priority tax measures —which include a proposed value-added tax on digital service providers and excise tax on single-use plastic bags—would push up revenues to P6.622 trillion in 2028 and help cut the deficit, economic officials said. —Ian Nicolas C. Cigaral INQ
