Government raising P3 billion from ‘premyo’ bonds

MANILA,Philippines — The government is eyeing to raise P3 billion from the issuance of one-year prize or “premyo” bonds, which may be launched as early as next week, according to the Bureau of the Treasury (BTr).

In an interview, National Treasurer Rosalia De Leon said the Treasury is initially eyeing to raise P3 billion for its planned lottery bonds. She said the government may consider upsizing the issuance, but it would depend on the capacity of the Treasury’s system.

“For now, we’re looking at a volume of P3 billion, but we’ll have to see how far our system can go,” De Leon told reporters.

Under the so-called “premyo bonds,” individual investors, associations and cooperatives have a chance to win as much as P1 million for a minimum investment of P500.

De Leon said the Treasury would sell the securities at multiples of P500, each carrying quarterly coupon payments, as well as a chance to win cash prizes during quarterly draws.

According to De Leon, the BTr is eyeing to launch the fund raising activity as early as next week, in time for the release of bonuses to government employees and the maturity of some retail Treasury bonds--giving individual investors the opportunity to reinvest their money. The offering will last until December.

She said the Treasury would finalize the mechanics for the program by next week.

Meanwhile, De Leon said the Land Bank of the Philippines and the Development Bank of the Philippines are still in the process of selecting which banks to tap as selling agents for the offering.

De Leon said the Treasury prefers banks who have systems in place that would enable investors to access the securities online. She said this would prevent investors from swarming physical branches.

“We’re pressuring them that they should have the online system ready,  otherwise they have to commit the branches,” she said.

Depending on the turnout of this premyo bond issuance, De Leon said the government may consider repeating the fund raising activity in the future.

“We’ll have to evaluate the outcome of this offering and then of course, the appetite, and then we’ll have to look into the system limitations also of our infrastructure,” she said.

Meanwhile, the BTr Monday rejected all bids for 91-day Treasury bills (T-bills), while partially awarding 182-day securities. One-year or 364-day debt papers were fully awarded.

Had the auction committee decided to fully award the three-month securities, they would have fetched an average rate of 3.281 percent, 28.6 basis points up from the 2.995 percent recorded in the previous auction two weeks ago.

Total tenders for the 91-day T-bills reached P8.82 billion, slightly higher than the P8 billion offering.

Rates for the 182-day debt papers, meanwhile, averaged 3.198 percent, 2.4 basis points up from 3.174 percent two weeks ago after the auction committee capped the accepted rates.

As a result, only P3.8 billion of the P6 billion offering was awarded, despite having tenders amounting to P9.85 billion.

On the other hand, the 364-day bills fetched an average rate of 3.513 percent which is 6.3 basis points down from the previous auction’s level of 3.576 percent.

The P6 billion offering was almost thrice oversubscribed, with total tenders amounting to P17.868 billion.

According to De Leon, the result of the auction reflects the market’s appetite for the longer end of the curve given a declining interest rate environment.

“I think it’s really more catching up with the yield curve and at the same time, the preference is really going long given rates are lower,” she said.