National Treasurer Roberto Tan yesterday said that the sale of 91 and 182 day treasury bills will be scrapped for the second quarter due to lack of demand but one year bills and longer term bonds will continue to be auctioned off.

Tan also said the government will maintain its earlier borrowing program even if January borrowings plunged 19 percent from P48.8 billion last year to P39.6 billion.

The government will continue to borrow heavily from the domestic market to stem the peso’s continued appreciation.

Banks were not buying the shorter term bills because they earn more from the Bangko Sentral ng Pilipinas’ special deposit accounts.

Tan said that for the second quarter the domestic borrowing program would be unchanged at P84 billion from the previous quarter.

The 364-day of the short-term debts in the amount of P42 billion or P6 billion per month will be sold fortnightly from April to June.

Meanwhile, the treasury will sell P42 billion of benchmark treasury bonds, consisting of P14 billion per month during the fortnightly auctions. The bonds include the 3-, 4-, 5-, 7-, 10- and 20-year debts.

In the previous quarter, the government had programmed to sell P39 billion of T-bills and P45 billion, although actual borrowings may have come off lower as the treasury rejected bids in the last five auctions.

Adverse domestic political events and the worsening US credit crisis had made investors averse to investing in the local debt papers, which are the government’s primary source of domestic funding.

The treasury last sold the three-month and six-month debts on Jan. 21 for an average yield of 3.673 percent and 4.675 percent, respectively. The one-year paper fetched a rate of 5.266 percent on Feb. 4.

Banks’ attempt to jack up the bids above these rates were rejected outright by the treasury, saying it has enough liquidity while dismissing the bids as "unreasonable."

Last week’s T-bills auction failed to pick up despite the decision of the central back to remove the longer-tenor special deposit accounts, which had been partly blamed for the banks’ reluctance to invest in the T-bills.

The SDA offered rates above five percent, attracting yield-seekers to park their funds in the central bank instead of the low-yielding treasuries.

Last year, the government borrowed more from the foreign market, with P50.3 billion, while it paid more local debts resulting in net repayment of P1.5 billion.

Net financing, which takes out repayments, also dropped from last year. It fell by 6.2 percent to P27.9 billion from P29.7 billion.

Net financing from the domestic market reached P29.5 billion, a reversal from net repayment of P15.3 billion last year.

From the external front, the government made a net repayment of P1.6 billion compared to net financing of P45.1 billion last year.

The government’s gross borrowings this year is estimated to reach P345.8 billion, composed of P242.3 billion from domestic sources and P103.8 billion from foreign lenders.

Last year, gross borrowings reached P443.6 billion, composed of P326.9 billion from the domestic market and P116.7 billion from external sources.

The government’s net financing requirement this year is set at P17.7 billion, composed of P16.1 billion foreign and P1.6 billion domestic.

Last year, net financing reached P97.4 billion, consisting of P54.5 billion external and P42.9 billion local.

The government is aiming to close the gap in the budget this year. It posted a P13.9-billion shortfall in January, about half the P29.7 billion last year.