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Gov’t selling at least P30-B retail bonds

Posted on March 24, 2017

THE GOVERNMENT will sell at least P30 billion worth of three-year retail treasury bonds (RTBs) on March 28, the Treasury bureau announced yesterday, explaining that this debt offer aimed partly at enticing more of the general public “to get into the habit of investing.”

The RTBs, which will mature in 2020, will be offered in minimum denominations of P5,000, with auction set for March 28 and offer to the general public from March 28 to April 6.

Issue date has been set on April 11, according to a notice of offering for eligible dealers of government securities.

The Treasury will hold road shows for this RTB sale in Metro Manila as well as key areas like Baguio, Batangas, Cagayan de Oro, Cebu, Davao, Iloilo, Legazpi, and Pampanga.

The government tapped First Metro Investment Corp. and Land Bank of the Philippines as joint lead issue managers, as well as BDO Capital & Investment Corp., BPI Capital Corp., Development Bank of the Philippines, China Bank Capital Corp., and SB Capital Corp. as joint issue managers for this RTB sale.

This will be the second RTB offer under the administration of President Rodrigo R. Duterte, after the sale of 10-year papers in September last year that raised P65 billion.

And last January, the Philippines raised $500 million from a 25-year US dollar bond offering.

“We want more Filipinos to get into the habit of investing and become more financially aware of how their money could work harder for them,” a statement quoted National Treasurer Rosalia V. de Leon as saying.

“Retail treasury bonds offer an opportunity for the investing public to access affordable, higher-yielding instruments compared to regular time deposits,” the statement added.

“Moreover, the RTBs’ low-risk nature and three-year tenor makes this investment product more attractive to any Filipino who would want to get into the habit of investing.”

These investment instruments earn a fixed interest rate based on prevailing market rates with interest coupons paid quarterly.

RTBs, which are part of the government’s funding program, aim “to promote financial literacy and inclusion of individual investors,” the Treasury said, explaining that financial literacy, in turn, is key to the current administration’s overall thrust of making sure economic growth lifts more people out of poverty.

The new Philippine Development Plan 2017-2022 approved last month aims to spur gross domestic product growth to an annual average of 7-8% in that period from the 6.2% average in the six years under the preceding government of former president Benigno S. C. Aquino III, slash unemployment rate to 3-5% by 2022 -- when the current government steps down -- from 5.5% last year and achieve its bottom line of cutting the national poverty rate to 14% also by then, from 21.6% in 2015.

Sought for comment, a bond trader said the short tenor of the RTB was expected in the wake of the US Federal Reserve’s decision last week to hike policy rates by 25 basis points to 0.75-1% for the second time in three months in the face of solid US job gains and confidence in hitting the two percent inflation target for 2017.

Another trader said that “if the government’s target are retail investors... they don’t want longer-dated debt papers since existing RTBs are usually 10- or seven-years.”

“Retail investors will pretty much prefer shorter tenors and given that interest rates will increase, they will likely go to shorter-dated bonds,” the trader said by phone, referring to analyst expectations of up to two interest rate hikes this year by the Bangko Sentral ng Pilipinas in the wake of two such increases by the US Federal Reserve since December last year.

Asked about possible market reception of the latest RTB offer, the trader said it could be oversubscribed three times, with the papers fetching a coupon rate of 4-4.125%. “It will be well-received as it is default free. It’s the national government who’s issuing the papers so you can sleep soundly at night,” the trader noted.

Another trader texted the “[m]arket is currently expecting the three-y[ea]r RTB to fetch a yield bet[ween] 4.125-[4].95 (%).”

“But I think it can go higher, since investors would want more concession from the gov[ernment].” -- Janine Marie D. Soliman