Philippines to boost debt sales after rate cut: Treasurer
The Philippines will probably increase domestic debt sales next quarter to take advantage of liquidity that may further expand after central bank reduced borrowing costs last week, Treasurer Rosalia de Leon said.
The Treasury plans to boost debt auctions to 50 billion pesos ($1.2 billion) per month in the second quarter, de Leon indicated in a March 15 interview before the release of the borrowing plan. Each auction will probably offer 30 billion pesos of bonds maturing in three, five and seven years, and 20 billion pesos of bills, she said. Monthly debt sales this quarter included 15 billion pesos of bills and 25 billion pesos of bonds.
The Philippines may shun the global bond market this year, de Leon said earlier this month, ending a decade-long run as it takes advantage of record-low domestic borrowing rates while not adding to capital inflows. Bangko Sentral ng Pilipinas cut the rate on 1.86 trillion pesos of funds in special deposit accounts last week and signaled it may reduce this further to curb gains in the peso, the best performer of the past 12 months in the region and among emerging markets.
“There might be a movement of funds from the SDA to the auction,” de Leon said. “We’re still seeing oversubscription in auctions so yields won’t necessarily go up even if we increase the volume.”
The country plans to borrow 730 billion pesos this year. Debt sales this quarter totaled 120 billion pesos. The Treasury will keep the auction schedule at once per month for both bills and bonds next quarter, de Leon said.
The yield on the 7.25 per cent bond due February 2020 fell to 3.18 per cent on March 14, the same day BSP cut the SDA rate, based on midday fixing prices at Philippine Dealing & Exchange Corp.
The peso closed little changed at 40.608 per dollar on March 15. It has risen almost 6 per cent in the past 12 months.
The average maturity of Philippine debt has lengthened to 10.4 years from 6.7 years in 2010 after several bond exchanges, de Leon said. Debt narrowed to 51.4 per cent of gross domestic product at the end of 2012, from 54.7 per cent in 2008, she said.
“With a comfortable maturity profile, we are in a position to fill up the belly of the curve and build a reliable yield curve, the absence of which represents a barrier to companies who are interested in issuing corporate debt,” the treasurer told members of the Money Market Association of the Philippines on March 15.
President Benigno Aquino’s administration is narrowing the budget deficit as a proportion of GDP, extending debt maturity and cutting foreign-currency risks in pursuit of an investment- grade credit rating. The $225 billion economy expanded at the fastest pace in two years in 2012, surpassing neighbors in Southeast Asia, helped by a record-low benchmark rate and inflation near the low end of a 3 per cent to 5 per cent target.