The Philippines has raised $866.2 million during the price-setting auction for the country’s first-ever onshore retail dollar bond (RDB) offering, and the government hopes to generate more during the remaining offer period.
Launched yesterday, the two-tranche RDBs fetched total tenders of $938.2 million.
The total amount awarded was more than two times the minimum issue size of $400 million for the five-year and 10-year RDBs combined.
“(We are) happy with the results of maiden offering for RDBs. Rates reflect various consideration for pricing including performance of ROPs, liquidity and worries on US rates liftoff,” Rosalia de Leon, national treasurer, told reporters via Viber yesterday.
The five-year RDBs fetched a rate of 1.375 percent, while the retail securities maturing 2031 recorded a coupon of 2.25 percent.
Demand for the shorter tenor reached $607.8 million versus the $200 million offering, with the government awarding $551.8 million.
As for the 10-year bonds, the tenders reached $330.4 million, compared to the $200 million offer.
The Bureau of the Treasury (BTr) awarded $314.4 million for the said tenor.
De Leon said she is hoping to have the same demand during the offer period.
The public offer period runs from September 15 to October 1, 2021.
“Need two weeks since need to throw the net far and wide to catch more,” De Leon said.
The RDBs will be the first onshore US dollar-denominated bonds to be issued by the BTr in amounts of as low as $300.
Meanwhile, Carlos Dominguez, Department of Finance (DOF) secretary, urged small investors to invest in the RDB offering, saying this income opportunity is a “win-win proposition” that will promote financial inclusion while raising funds for the country’s economic investments and comprehensive effort to defeat the pandemic.
Dominguez said the newly launched RDBs and the digital innovations put in place to make investing in them easier and more convenient will allow Filipinos, especially overseas Filipino workers, to buy government securities without having to pay out “huge commissions to brokers and traders.”
These digital innovations include the Bonds.PH, the mobile applications of the Overseas Filipino Bank and Land Bank of the Philippines and the Treasury’s Online Ordering Facility.
Bond offerings such as the RDBs will also support the development of the domestic capital markets, Dominguez said.
“The RDBs will offer our small investors an outlet for diversifying their investment portfolios. They do not need to keep their dollar holdings in deposit accounts that pay minimal interest. With a minimum investment of just $300 or about 15,000 pesos, small investors can now grow their US dollar savings,” Dominguez said at the virtual launching of the RDBs yesterday.
He said shifting the buying and selling of government-issued bonds online has made investing in them “seamless and nearly friction-free.”
“Overall, this aids in restoring the vigor of the Philippine economy at the soonest possible time,” Dominguez added.
De Leon said several banks have agreed to set the minimum initial deposit and average daily maintaining balance requirement to zero for those who would want to purchase these US dollar-denominated securities.
The DOF said this plan to democratize dollar-bond investing means that banks would do away with their current practice of requiring depositors to open dollar accounts with a minimum balance of $500 to $1,000 before being able to invest in the RDBs.
De Leon said to offer the RDBs to the widest investor base possible, the BTr introduced two accounts for people to invest in this instrument — the straight US dollar and PesoClear options.
Those who wish to invest in RDBs through the straight US dollar method would need to open US dollar accounts with a local participating bank that will serve as the cash settlement account where the interest earnings and the principal repayment at maturity will be credited to the investor, De Leon said.
Aside from waiving the usual requirements on the opening of dollar accounts, De Leon said several banks have committed to make it easier and safer for investors of the RDBs to open US dollar accounts without having to physically go to their branches.
As for the PesoClear option, investors who do not have US dollar accounts can use their existing Philippine bank accounts to purchase the RDBs.
In the initial investment, the investor will pay the peso equivalent of the face amount of the RDBs based on the prevailing market exchange rates.
During the life of the RDBs, the investor’s settlement bank will automatically convert the quarterly interest payments and principal repayment at maturity into pesos and credit these to the Philippine account of the investor, all at the market exchange rate during the transactions. – Angela Celis
