Gov't raises $866-M of new debt at maiden retail dollar bond sale

Ramon Royandoyan - Philstar.com
Gov't raises $866-M of new debt at maiden retail dollar bond sale
As the first of its kind, simply because the treasury department would be offering US dollar-denominated bonds for as low as $300, National Treasurer Rosalia de Leon noted that the rates and bids were "over cut-off".
STAR / File

MANILA, Philippines — The Philippine government raised $866.2 million during its maiden retail dollar bond sale aimed at promoting financial inclusion while raising funds for pandemic response.

The Bureau of the Treasury awarded $551.8 million worth of five-year bonds and $314 million worth of 10-year bonds during Wednesday’s auction.

Investors booked orders of $607.8 million for the bonds due in 2026 — which fetched a coupon rate of 1.375% — but the Treasury rejected $56 million worth of bids. The longer-dated 10-year papers, with a bigger rate of 2.250%, attracted bids worth P330.40 million, but $16 million of which was rejected.

The Treasury had to turn down some orders after “rates and bids (went) over cut-off,” National Treasurer Rosalia De Leon said in a text message.

For Finance Secretary Carlos Dominguez III, investing in retail dollar bonds is a “win-win proposition” for both investors and the government.

“The Retail Dollar Bonds will offer our small investors an outlet for diversifying their investment portfolios. They do not need to keep their dollar holdings in deposit accounts that pay minimal interest,” Dominguez said in a statement.

The dual-tranche retail dollar bond sale is the first of its kind in the Philippines, where the government typically sells peso-denominated retail treasury bonds to raise funds for budgetary support.

With a minimum investment of just $300 dollars or about P15,000 pesos, the government hoped to attract small investors, including overseas Filipino workers looking to grow their US dollar savings.

At the same time, Dominguez said the Treasury’s digital innovations, specifically its online ordering facility, would allow retail investors to buy government securities without having to pay “huge commissions to brokers and traders”.

Earlier, the Treasury said it has teamed up with the country’s leading banks to let small investors buy the retail dollar bons at easy terms. The Department of Finance believe this move would “democratize” dollar-bond investing because banks would need to scrap common practice of requiring depositors to open dollar accounts with a balance of $500 to $1,000 before investing.

De Leon said several banks have agreed to set the minimum initial deposit and average daily maintaining balance requirement to zero for those who would want to purchase these US dollar-denominated securities. 

As it is, the government has been tapping both onshore and offshore debt markets to raise much-needed cash for its costly coronavirus programs.

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