Three-year RTBs priced at 2.375% as strong liquidity boosts demand

The government on Tuesday sold an initial P221.218 billion in three-year retail Treasury bonds (RTBs) on strong investor demand due to robust liquidity in the market.

Bids for the retail papers maturing in 2024 offered by the Bureau of the Treasury (BTr) at the rate-setting auction for the bonds reached P284.183 billion, well above the initial plan to raise at least P30 billion.

The government sold more retail bonds at yesterday’s rate-setting auction compared with last year’s levels.

In July, it accepted an initial P193 billion for its offer of five-year RTBs and ended up selling a record high P516 billion at the end of the offer period. Meanwhile, it sold P134 billion during the pricing auction for three-year retail papers in February 2020, raising P310.8 billion in total.

The three-year retail bonds offered on Tuesday fetched a coupon rate of 2.375%, 200 basis points (bps) lower than the 4.375% rate quoted for the RTBs sold in February 2020.

However, this was 27.7 bps higher than the 2.098% rate for the tenor in the secondary market on Monday, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The government offers retail Treasury bonds to encourage investors to put their money in state debt as these offer higher returns compared with prevailing market rates. These are also considered low-risk investments because they are backed by the state.

The Treasury is set to offer the three-year RTBs for three weeks until March 4, unless it closes the offer period earlier.

National Treasurer Rosalia V. De Leon said they expect to sell more RTBs during the offer period, but did not specify a target volume. 

She attributed the huge demand to “oozing liquidity” in the market and investors’ “flight to safe havens.”

“Better yield than time deposits. Safe and low risk. Biggest reward is contributing to recovery and nation building,” Ms. De Leon told reporters via Viber after the auction.

“Greater financial inclusion can contribute to financial stability and economic development, which is crucial to achieving inclusive growth,” she told investors during a briefing on Tuesday.

The BTr also opened on Tuesday a bond exchange offer where bondholders of FXTN 07-57, FXTN 10-53, RTB 03-09, RTB-10-03 and FXTN 10-55 can swap their old government securities for the new retail bonds.

“[The bonds have a] good rate to encourage holders to swap,” Ms. De Leon said when asked on her outlook for the bond exchange program.

The three-year bonds are being sold in denominations of at least P5,000. The debt papers will be issued on March 9 and mature on March 9, 2024. 

Eligible investors are individuals, corporates, cooperatives, retirement funds and provident funds.

The BTr said the instruments can be bought from selling agents’ physical branches, as well as online via the Treasury’s website and other digital platforms such as the mobile application Bonds.PH.

Land Bank of the Philippines (LANDBANK) and Development Bank of the Philippines (DBP) are the joint lead issue managers for the transaction.

Meanwhile, the joint issue managers are LANDBANK, DBP, BDO Capital and Investment Corp., BPI Capital Corp., China Bank Capital Corp., First Metro Investment Corp. (FMIC), PNB Capital and Investment Corp., RCBC Capital Corp., SB Capital Corp., and UnionBank of the Philippines, Inc.

The selling agents for the bonds are Asia United Bank Corp.; Australia and New Zealand Banking Group Ltd.; BDO Unibank, Inc.; BDO Capital; BPI Capital; China Banking Corp.; Citibank N.A.; CTBC Bank (Philippines) Corp.; DBP; East West Banking Corp.; FMIC; ING Bank; LANDBANK; Metropolitan Bank & Trust Co.; Philippine Bank of Communications; Philippine National Bank; Rizal Commercial Banking Corp.; Security Bank Corp.; Standard Chartered Bank; the Hongkong and Shanghai Banking Corp. Ltd.; and UnionBank.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit that is expected to hit 8.9% of gross domestic product. — Beatrice M. Laforga