The government remains well-positioned to meet its disbursement requirements despite the multiple rejections made in the Bureau of the Treasury’s (BTr) auctions of treasury bills and treasury bonds, officials said yesterday.
The BTr rejected bids for the new seven-year treasury bonds auctioned Tuesday as rates were again higher than comparable secondary market benchmark.
This is the fourth consecutive rejection, as the government also rejected bids for treasury bills last Monday and for both treasury bills and bonds auction last week, bringing the total rejected programmed offer to P100 billion.
“Following the strong retail treasury bond (RTB) reception, the government is well-positioned to meet disbursements despite BTr’s rejections during the auctions,” Carlos Dominguez, Department of Finance secretary, told reporters via Viber yesterday.
Rosalia de Leon, national treasurer, echoed the same sentiment saying the five-year RTBs, which allowed the government to raise a total of P457.8 billion last week, had “good timing, good execution and good participation.”
“Full rejection (of the seven-year IOUs yesterday). Not much demand with amount tendered, just more than a billion in excess of offer for new seven-year,” de Leon said.
“Markets still roiled by rising inflation fears from surge in oil and commodity prices. Verdict in Fed rate hike is also awaited,” she added.
During the President’s televised meeting with Cabinet officials Monday night, Dominguez said the Russia-Ukraine conflict will also likely cause a surge in interest rates or cost of borrowing, which was expected to go up even prior to the crisis because of the US Federal Reserve’s tightening of monetary policy.
“The conflict will increase the perception of risk in investments,” he added, which could, in turn, make investors more conservative, or decide to postpone their planned investments owing to global uncertainties triggered by the crisis.
“Once sanctions are imposed, it will take a long time for investor and consumer confidence to return to normal,” Dominguez said.
As for the impact on the country’s fiscal health, Dominguez said the government support needed to protect vulnerable citizens and critical sectors most affected by the crisis will stretch state finances further.
He said the Russia-Ukraine conflict would not directly affect the domestic economy, as neither country is a major trading partner of the Philippines.
“Instead, the Philippine economy will likely be collateral damage; it is as if we are hit by a ricocheting bullet,” Dominguez said.
He added these “indirect shocks” will likely be felt through four major channels: the commodities market, financial market, investments and its impact on the country’s fiscal health.
Dominguez however assured the President that the impact of the current Russia-Ukraine crisis on the Philippines would only be temporary, and that a comprehensive set of measures is now being implemented to ease its impact on the economy and the people.
“I would like to emphasize that we do not expect this crisis to last very long. However, there may be some lingering effects. We have seen similar crises in the past, such as in The Gulf War in 1990, the oil price shock of 2008 and also the first Russia-Ukraine Conflict in 2014, and we have weathered all of these crises very well,” he said.
Dominguez pointed out the 1997 Asian Financial Crisis and the global financial shock of 2008 had even more severe, direct and longer effects on the economy, yet the Philippines was able to overcome their challenges.
“Based on these experiences, we are confident that we have the tools and preparation necessary to help our people through this crisis,” the finance chief said. – Angela Celis
