Government kicks off 3-week retail Treasury bond offer

MANILA, Philippines — The Duterte administration kicked off a 3-week retail Treasury bond offer on Tuesday by setting the interest which individual investors are bound to earn from lending their funds to government.

In a rate-setting auction, the Bureau of the Treasury raised P221.22 billion from selling 3-year RTBs maturing March 2024. The papers fetched a coupon rate of 2.375%.

More than raising funds, the sale on Tuesday was meant to set the returns investors are bound to get for buying RTBs. The bonds would be for sale at select banks from Tuesday to March 4, requiring only a minimum investment of P5,000, and succeeding investments of the same amount.

For this round, 21 banks will be selling RTBs, including state lenders Land Bank of the Philippines and Development Bank of the Philippines. Other entities acting as RTB agents include BDO Unibank Inc., BPI Capital Corp., East West Banking Corp. Metropolitan Bank & Trust Co. and its investment arm, First Metro Investment Corp., Security Bank Corp. and UnionBank of the Philippines.

RTBs are typically offered to entice smaller individual investors to save up, but admittedly, strong sales of RTBs in recent years were still mainly driven by institutional investors such as banks and pension funds. In July last year, for instance, Treasury raised a record P516.3 billion from 5-year RTBs. 

Proceeds from the current offer is expected to replenish the government’s pandemic war-chest, while also helping bridge the budget deficit set to widen further from last year’s record to P1.78 trillion.

RTBs are considered low-risk investments since they are backed by the government. Interest payments for the retail bonds are done quarterly and investors can expect a higher yield than time deposits.

Apart from the bond sale, some existing bondholders would also have the option to swap their old government securities with the new retail bonds during the sale period. The bond exchange can only be availed by investors holding FXTN 07-57, FXTN 10-53, RTB 03-09, RTB-10-03 and FXTN 10-55, the Treasury said.

The government regularly borrows from foreign and domestic markets to plug its budget deficit and pay old debts. These new borrowings, in turn, accumulates with the rest of the debt pile forecast to hit P11.98 trillion this year from 2020’s P9.8 trillion.

Apart from RTBs, the Treasury plans to float P506 billion worth of T-bills and T-bonds amounting to P1.53 trillion this year to raise funds from domestic investors.