Philippines plans 1^st retail bond under Marcos

By Diego Gabriel C. Robles

THE BUREAU of the Treasury (BTr) is planning to raise at least P30 billion in the first retail Treasury bond (RTB) issue under the Marcos administration.

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

The offer period for the peso-denominated debt is from Aug. 23 to Sept. 2, with a tenor of 5.5 years. The BTr is expected to hold a price-setting auction on Aug. 23.

National Treasurer Rosalia V. de Leon confirmed with Reuters that planning for the RTB issue was ongoing, but did not give details.

The bonds are targeted for small investors who want low-risk, higher-yielding savings instruments backed by the government.

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

This will be the second RTB offer this year.

In March, the government raised P457.8 billion from the issuance of five-year RTBs, which have a coupon rate of 4.875%.

Meanwhile, there was no announcement of an offering for Treasury bonds (T-bonds) for Aug. 23 (Tuesday) on the Treasury website.

Yields of the five-year bonds at the secondary market stood at 5.4240% on Wednesday, based on data from the PHP Bloomberg Valuation Service Reference Rates posted on the Philippine Dealing System’s website.

Asked about the timing of the RTB offer, a trader said there is a need for the government to borrow.

“Timing wise, it is better now because yields dropped from the peak. They want to lock in borrowing so 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 fully awarded the debt papers at lower rates.

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

“This offering has all the potential to be huge, in terms of the amount to be issued. We’ve had very strong FXTN (Fixed Rate Treasury Notes) issuances as of late 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, while it ballooned in this time of the pandemic, continues to be judicious as they raised funds while rates are low,” the second trader added.

On Tuesday, Ms. De Leon told the Senate Committee on Ways and Means that the borrowing requirement was reduced to P2.2 trillion this year from P2.5 trillion last year, with 75% of the debt expected to be sourced domestically.

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

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

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