Philippines plans 1st retail bond under Marcos

Through Diego Gabriel C Robles

THE BUREAU of the Treasury (BTr) plans to raise at least P30 billion in the first retail Treasury Bond (RTB) issuance under the Marcos Administration.

According to a source, the BTr will sell at least P30 billion worth of RTBs maturing in 2028 and allow existing holders to swap debt maturing this year and 2023 for the new bonds.

The offering period for the peso-denominated notes will run from August 23 to September 2 with a term of 5.5 years. The BTr is expected to hold an auction to determine the price on August 23rd.

National Treasurer Rosalia V. de Leon confirmed to Reuters that planning for the RTB edition is underway, but gave no details.

The bonds are aimed at small investors who are looking for low-risk, high-yield and government-backed savings instruments.

A teaser posted on BTr’s Facebook page indicated that bonds will be sold in denominations of at least P5,000 and thereafter in multiples of P5,000.

This will be the second RTB or similaronwardsuh this year.

In March, the government collected 457.8 billion pesos from the issuance of fifive-year RTBs, which have a coupon of 4.875%.

Meanwhile, on the Treasury Department’s website, there was no announcement of a Treasury Bond (T-Bond) offering for August 23 (Tuesday).

Yields on the secondary market for five-year bonds came in at 5.4240% on Wednesday, based on data from the PHP Bloomberg Valuation Service Reference Rates, published on the Philippine Dealing System website.

Asked about the time of the RTB or similaronwardsuh, a trader said the government needed to borrow.

“In terms of timing, it’s better now because yields have fallen off the peak. They want to hold on to borrowing as long as there is strong demand, as evidenced by previous auctions,” the trader said in a Viber message.

In August so far, all T-bond auctions have sold the debt fully at lower rates.

BTr raised a total of P105 billion from T-Bonds in three separate auctions this month, with all three resulting in the opening of BTr’s tap facility to raise an additional P35 billion.

“This offering has the potential to be huge in terms of the amount to be spent. We’ve had some very strong FXTN (Fixed Rate Treasury Notes) issuance recently, so I won’t be surprised if this will be a record-breaking RTB offering in terms of investor interest,” a second trader said in a Viber message.

“Government borrowing, although exploding in this time of the pandemic, remains sensible as it has raised funds while interest rates are low,” the second trader added.

On Tuesday, Ms De Leon told the Senate Appropriations Committee that borrowing needs have been reduced to 2.2 trillion pesos this year from 2.5 trillion pesos last year, with 75% of the debt expected to be domestic.

The government aims to bring the debt ratio down to 61.8% of gross domestic product (GDP) by the end of 2022, from 62.1% at the end of the second quarter. The rate is expected to drop to 61.3% by next year and 52.5% by 2028.

The first trader said that for RTB to be attractive, yield on RTB should be between 5.875% and 5.75%, citing July inbottlenation.

In July, inflation accelerated by 6.4% to an average of 4.7% as food and transport prices continued to rise.