NG defers issuance of longer-term SDTs

The National Government will defer the issuance of the longer-term small-denominated Treasury bills (SDTs) until the first quarter of 2000, industry sources said yesterday.

Sources said the government will wait for the results of the proposed 25 to 30-year bond offering before proceeding with the flotation of the five and seven-year SDTs.

"The 25-30 year offering will test the market for long-term maturity bills," the sources said. The government had intended to float the five-and seven-year bills in the last quarter of this year but due to tight schedule, it would just give way to the 25-to 30-year bond offering.

According to sources privy to the proposed long-term SDT offer, the underwriters of the proposed SDT float are still interested to handle it.

"The Bank of Philippine Islands (the lead underwriter for the offering) is not scrapping the plan. They just want to wait for the proper time to have a gauge the market acceptance for this kind of product," the sources said.

They said the government would need ample time to study the operational processes of offering long-term bills before launching another borrowing tool that carries a longer maturity.

Sources said the government would eventually try to gear towards longer term T-bills. "The Bureau of Treasury is shifting to borrowing long-term," the sources said.

Aside from BPI, the other participating banks in the proposed long-term SDT offering are HSBC, Banco De Oro and Land Bank of the Philippines.

The longer-term bills represent the third tranche of a total of P50 billion approved SDT flotation. The National Government floated P30-billion worth of SDTs in the past few months.

Just like the previous two offerings, the third SDT offering will go through the same process of institutional book building first before it would be offered to retail buyers.

Despite the longer maturity, the latest SDT offering will still carry a market-based interest rate.

SDT carries similar features as the fixed rate Treasury notes offered by the Bureau of Treasury while the PROgress bonds give investors a chance to exchange their bond holdings into shares in any government firm up for privatization.