Government eyes euro bonds, sees higher RTB takeup

MANILA, Philippines — The Philippines is looking at offering euro-denominated bonds in a bid to widen the government’s funding sources and boost state coffers for various projects. During a forum hosted by the Makati Business Club yesterday, Finance Secretary Benjamin Diokno said the Bureau of the Treasury would look into euro bonds following demand from investors abroad.

This stemmed from the recent roadshow conducted by the economic team in Frankfurt, Germany and in London.

“When we were in Frankfurt, investors told us to issue euro-denominated bonds because they use that,” Diokno told reporters.

“So we are considering, but we do not have the time frame yet.   I’m sure  there will be strong demand and strong interest especially with seniors and overseas workers who want to invest in the country since the returns are high,” he said.

For now, the government will offer the second Retail Treasury Bonds (RTBs) of the Marcos administration.

RTB-29, a 5.5-year bond designed for retail investors as a low-risk and higher-yielding savings instrument, will be offered starting Feb. 7. The government targets to raise at least P30 billion from the issuance of the RTB-29.

Diokno expressed optimism that there will be another huge demand as rates start to ease here and abroad.

“I think the rates are kind of coming down because of the renewed confidence. Let us see what the market will bear,” Diokno said.

“The most recent $3 billion bond that we floated was well-received. We are seeing the same demand,” he said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort echoed the same sentiment that demand could remain relatively high as yields remain attractive to the investing public.

Latest rate for the five-year bond was at 5.82 percent and the yield for the RTB offering could play around the same.

“It is possible to see another jumbo issuance of around P400 billion to P500 billion, similar to the previous RTB issuances,” Ricafort said.

“Since there are also scheduled large maturities of government securities this month that could also be tapped, on top of the demand from the investing public,” he said.

Ricafort said that yields are relatively attractive, with expectations of inflation easing in the months ahead that could support further normalization of bond yields.

During the last RTB issuance in September, the government borrowed P420.45 billion with a coupon rate of 5.75 percent, higher than the 5.434 percent and 5.64 percent reference rates.

For next week’s RTB offering, investors can buy for as low as P5,000. Interest payments will be paid quarterly during the term of the bond.

Diokno said RTBs are safe, low-risk and affordable, allowing Filipinos to contribute to nation-building and grow their savings at the same time.

RTBs have been the strongest performing financial instrument in the Treasury’s portfolio of bond offerings in the last two decades.

The Treasury has been issuing RTBs since 2001 to support financial inclusion and literacy among Filipinos by making government securities more accessible to small investors.

Since 2001, the government has raised over P4.37 trillion from RTBs. RTBs now account for 35 percent of the Treasury’s outstanding government securities.