The government set a P205-billion borrowing plan for the month of July. — REUTERS

By Beatrice M. Laforga, Reporter

THE government is seeking to borrow P205 billion from the domestic market in July, a fifth higher than the previous two months, the Bureau of the Treasury (BTr) said on Thursday.

In an advisory posted on Thursday, the BTr said it will borrow P145 billion in Treasury bills (T-bills) and P60 billion in Treasury bonds (T-bonds) next month.

The July borrowing plan is 21% higher than the P170-billion program set for both June and May.

Auctions for these government securities will be held every week for T-bills, while T-bonds will be offered fortnightly.

The BTr will offer P20 billion worth of 91-, 182- and 364-day T-bills every Monday — June 29, July 6, July 13, July 20 and July 27.

It will auction off P15 billion worth of 35-day papers every other Tuesday on June 30, July 14 and July 28.

For the long-term tenors, the BTr will raise P30 billion via seven-year T-bonds on July 7 and another P30 billion via 10-year notes on July 21.

National Treasurer Rosalia V. de Leon said they opted to offer longer tenors next month to “provide supply in the market.”

“Also, [the BTr is] yearning for yields with current low rates,” Ms. De Leon told reporters on Thursday via Viber.

Kevin Palma, peso sovereign debt trader of Robinsons Bank Corp., said strong demand on government securities will continue to persist next month “mainly due to continued efforts of the central bank to boost liquidity and stoke economic activity.”

With the bigger borrowing program, Mr. Palma said the government is taking advantage of the current cheap borrowing costs after rates plunged by around 70 basis points (bps) compared from the pre-lockdown levels.

“So I think it is prudent for the national government to take advantage of the relatively low-yield backdrop to build up on the coffers,” he said.

The Treasury raised a total of P223.71 billion in June via the sale of government debt papers — P151.3 billion in T-bills during weekly auctions and P75 billion in T-bonds which were offered fortnightly.

The total exceeded the P170-billion program set for the month but was slightly lower than the P246.3 billion raised in May,.

“Right now, COVID-19 dictates everything. If active cases continue to accelerate, then this may damp hopes of a quick economic recovery thus there might be a need for more stimulus. But if the spread of the virus wanes, then we may see some risk-on,” Mr. Palma added.

The government operates on a budget deficit where it spends more than the revenue it generates to fund programs, especially infrastructure projects, and stimulate economic growth.

It borrows from local and foreign sources to fund the budget deficit now seen to hit 8.4% of gross domestic product as state revenues plunge amid a severe economic downturn and spending increases on efforts to contain the coronavirus pandemic.