HSBC forecasts P465B in 2017 local borrowings

The government is expected to issue more bonds next year that will reach about P465 billion to address increased funding needs in line with the programmed hike in infrastructure spending, banking giant Hongkong and Shanghai Banking Corp. (HSBC) said in a report.

The report said the Duterte administration targets to increase infrastructure expenditure to about six to seven percent of gross domestic product (GDP) from the current five percent.

It noted that “unlike the previous government’s slow budget execution, there are signs of swifter spending in the new administration.”

It, however, said that tax reform proposals eyed to increase state revenues are not expected to bear fruit soon, thus, the government may face funding needs in 2017.

“An increase in government bond supply in 2017 seems unavoidable,” it said.

The government, through the Bureau of the Treasury (BTr), is expected to issue about P465 billion worth of securities next year, up by about 30 percent than the program this year.

In the second half of this year, or in the first six months of the current administration, programmed issuance of Treasury bills (T-bills) and Treasury bonds (T-bonds) amounts to P270 billion.

In particular, T-bills issuance is set at P20 billion for each month, with the offering for the benchmark 91-day bill at P8 billion and P6 billion each for the 182-day and 365-day papers.

T-bond issuance is at P25 billion per month. The report raised the possibility that the government may increase the volume of bond issuance next year to provide for the planned increase in spending.

”It may also opt to issue more bonds via debt switch as similarly seen in 2014 and 2015,” it added.