Treasury sets auction of P30-B retail bonds

MANILA, Philippines - The Philippines will launch its first retail Treasury bond offer in three years on Tuesday as the new administration seeks to increase spending and widen the deficit.

In a notice on its website yesterday, the Bureau of the Treasury said the government would sell at least P30 billion worth of 10-year retail bonds with the final rate yet to be determined.

The bonds can be purchased by individual investors for a minimum of P5,000.

The offer will run from Sept. 6 to 16 while the issue date is set on Sept. 20.

“The Republic reserves the right to increase the over-all size of the issue,” the BTR said.

In 2013, the government raised P150 billion from the sale of 10-year papers which fetched a rate of 3.25 percent. These bonds are now trading between 3.325 and 3.45 percent.

National Treasurer Roberto Tan said more details would be released on Tuesday when the Treasury also holds its regular local bond auction.

“For the volume, we will be flexible depending on the demand,” Tan said in a text message.

Under the government’s plan to ramp up spending, the economic team is targeting a budget gap of P388.86 billion, equivalent to 2.7 percent of economic output. The original goal was only two percent.

The government borrows from the local and international investors to finance its deficit and pay existing debts.

Sought for comment, a bond trader said the timing of the issuance was perfect following a strong second quarter GDP (gross domestic product).

“I think the Treasury thought it was a good opportunity for the retail investors to be given another avenue to invest as the country’s fundamentals remain positive,” the bond trader said over the phone.