Government to scrap some T-bond sales

The government may cancel some Treasury-bond auctions for the year, particularly those with maturities of two, three, four years, following the issuance of the retail Treasury bonds (RTBs), a bank analyst said.

A Rizal Commercial Banking Corp. (RCBC) analyst said the Bureau of Treasury (BTr) will offer up to P40-billion worth of five-year RTBs next week, the first tranche in a P100-billion issuance authorized by President Arroyo.

The analyst said the RTB issuance aims to cover up for foregone revenues from the non-implementation of the expanded value-added tax (EVAT) for almost a month now. The EVAT law was supposed to take effect last July 1 but was stopped by a temporary restraining order (TRO) issued by the Supreme Court.

"While it is true the government’s budget deficit is on track versus target, the EVAT delay has so far caused foregone revenues of P5 billion per month. It is this that government is likely trying to plug by issuing the RTBs which is also meant to siphon off liquidity from the recent RTB maturities of about P40 billion," the analyst said, adding the government may still likely tap the international bond market.

"It is hard to think of government foregoing the $850 million foreign borrowing given bigger dollar requirements for oil imports and the currency fragility, even if some argue that the political premium has made foreign borrowing more expensive," the RCBC official said.

The BTr will auction off next week as much as P50 billion worth of RTBs.

Finance undersecretary Roberto Tan said they would offer on Tuesday P10 billion worth of five-year RTBs with fixed interest through Dutch auction participated in by government eligible securities dealers (GSED).

He said the Bureau of Treasury (BTR), one of the revenue generating agencies of the DOF, will issue additional bonds worth up to P40 billion end of next week to retail investors. These debt papers would have the same price and tenor as the first auction.

The BTR has named the Development Bank of the Philippines and the Land Bank of the Philippines as issue managers for the RTB offering. GSEDs can participate as selling agents after qualifying through the Dutch auction.

The RTB is part of the Small Investors Program (SIP), a savings mobilization program designed to make government securities available to retail investors, create savings consciousness among Filipinos and develop the local capital market by expanding the investor base of government securities.

The success of previous offerings indicates that the RTB has gained acceptance among small investors.