THE GOVERNMENT is looking to raise P250 billion from the local market in September, 25% higher than the P200-billion program this month, as it seeks to take advantage of low rates and market liquidity, the Treasury said.

In an advisory, the Bureau of the Treasury (BTr) said it set a P75-billion borrowing program for Treasury bills (T-bills) in September, while aiming to raise P175 billion via the Treasury bonds (T-bonds).

This is bigger than the P60 billion programmed for the T-bills in August, and the P140-billion borrowing target for T-bonds.

The BTr adopted a larger borrowing plan since more auctions can be held in September which has five weeks, National Treasurer Rosalia V. de Leon said in a Viber message on Thursday.

Broken down, the Treasury will offer T-bills worth P15 billion every Monday, or P5 billion each in 91-, 182- and 364-day debt papers.

It will also auction off T-bonds every Tuesday worth P35 billion each. In particular, the BTr will offer five-year bonds on Aug. 31, seven-year securities on Sept. 7 and 21, and 10-year notes on Sept. 14 and Sept. 28.

The government runs on a budget deficit as it spends more than the revenue it generates to support economic growth. It borrows from both local and foreign lenders to plug this fiscal gap seen to hit 9.3% of gross domestic product this year.

In August, the BTr raised P175 billion from the local market, falling short of the programmed borrowing for the month after rejecting all bids during the 20-year bond auction on Aug. 24 when rates sought by investors soared.

A bond trader said demand for government securities will continue next month since the market is still awash with cash and there is still appetite for safe assets amid the highly uncertain environment due to the coronavirus pandemic.

“The market is still armed with liquidity and at the moment, risk aversion lingers due to the continued spread of the coronavirus. Inflation fears onshore have also dissipated and this should continue to benefit and spur modest demand for local government securities,” the trader said via Viber.

The trader said rates are expected to remain steady in September on expectations that the Bangko Sentral ng Pilipinas (BSP) will keep policy rates at a record low for the rest of the year.

“However, the market is also vigilant on any possible plans of the US Fed to taper its monthly asset purchases, which may cause for yields to adjust slightly higher,” the trader added.

The BSP kept its key policy rate at a record low of 2% for a sixth consecutive meeting early this month citing the need to further support the economy’s recovery.

Offshore, investors are currently waiting for more details on when the US Federal Reserve will start scaling down its bond purchases. 

Minutes of the Fed’s July 27-28 meeting released last week showed the US central bank is expecting to reduce its monthly purchases of $120 billion in US Treasury bonds and mortgage-backed securities later this year, according to a report by Reuters.

The BTr is looking to raise P2.49 trillion from domestic lenders this year, and the remaining P581 billion will be sourced externally.

Gross borrowings hit P1.9 trillion in the first half, up 12% year on year. Of which, P1.648 trillion were from local sources and P284.95 billion were from foreign lenders. — Beatrice M. Laforga