The Money Market Association of the Philippines (MART), the group of securities dealers in the country, has asked the Bureau of the Treasury (BTr) to reconsider its move to sell government debt papers through a negotiation.
In a March 6 letter to Finance Undersecretary and Acting National Treasurer Roberto Tan, MART said the use of negotiated sale for government securities in the primary market may be detrimental to the market.
MART said the move is not transparent, does not provide the market with a level playing field and is disadvantageous to the primary and secondary markets.
In a March 3 memorandum to dealers, Tan said the BTr would again sell debt papers through negotiation.
“The BTr will sell anew government securities through negotiation when and as the need arises without any prior announcement,” Tan said.
He said that the counter would be opened to government-owned and controlled corporations.
Interest rates will be determined through negotiation starting at the previously accepted rates.
On the issue of transparency, MART said the market price of a bond is a factor of supply, timing of issuance, tenor to be issued, among others.
“If this information will not be publicly given, bond price will be subject to extreme volatility,” MART said.
Furthermore, the group said a negotiated sale has a tendency to favor the larger banks which may have more capacity to bid more aggressively in this window.
MART said larger banks have bigger clients with bigger requirements as well as bigger funding pool.
“This is in contrast to the regular public auction wherein all government securities dealers, regardless of size, would have equal opportunity to win at same price,” MART said.