PH sells PHP15B of tokenized T-bonds

The Bureau of the Treasury (BTr) on Monday raised PHP 15 billion from the first-ever sale of tokenized Treasury bonds (TTBs).

In a statement, the BTr said the maiden offering of one-year tokenized bonds had a coupon rate of 6.5%.

“The BTr saw strong demand from qualified institutional investors for the TTBs, with the size of the book reaching PHP 31.426 billion, more than three times the target issue size of PHP 10 billion,” it said.

“This allowed the BTr to upsize the issue to PHP 15 billion at 6.5%, aligned with the prevailing 1-year secondary market rates despite the non-tradability of the TTBs,” it added.

At the secondary market on Friday, the one-year benchmark tenor dropped by 10.01 basis points (bps) week on week to end at 6.4916%, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

The TTBs are fixed-rate government securities that pay semi-annual coupon. It will be issued in the form of digital tokens to be maintained in the BTr’s Distributed Ledger Technology Registry. Settlement is scheduled on Nov. 22.

The Treasury offered the tokenized bonds to institutional buyers at minimum denominations of P10 million, with increments of P1 million.

The issue managers for the TTBs are Land Bank of the Philippines and Development Bank of the Philippines.

“The bond tokenization program is anchored on the National Government’s long-term vision of a financially inclusive domestic capital market. Through streamlining settlement procedures and minimizing friction costs, this initiative is a huge leap towards our end goal of democratizing investment and empowering our small investors,” Finance Secretary Benjamin E. Diokno said in a statement.

Bangko Sentral ng Pilipinas  Governor Eli M. Remolona, Jr. said the BTr’s initiative to tokenize T-bonds would expand investment options for Filipinos.

“Right now, the focus is on institutional investors but hopefully, we can expand this project to retail investors over time,” Mr. Remolona said.

The strong demand for the TTBs was a “good signal” of market interest on tokenized bonds, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted in a Viber message.

The high demand was also due to the declining interest rates and bond yields since November, which was a result of expectations that the US Federal Reserve might start its easing cycle in 2024.

The US central bank kept its benchmark interest rate steady at the 5.25%-5.5% range for a second straight time during its Oct. 31-Nov. 1 meeting.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year. The Federal Open Market Committee will next meet on Dec. 12-13 to review policy.

The Treasury had canceled the auction of 91-day, 182-day and 364-day Treasury bills scheduled on Monday to make way for the tokenized bonds. 

Meanwhile, the BTr also awarded the top 10 Government Securities Eligible Dealers (GSED) Market Makers for 2024.

The banks were BDO Unibank, Inc., Bank of the Philippine Islands, China Banking Corp., Citibank N.A., Development Bank of the Philippines, First Metro Investment Corp., Land Bank of the Philippines, Philippine National Bank, Union Bank of the Philippines, Inc., and the Metropolitan Bank and Trust Co. (Metrobank).

Metrobank was recognized as the top GSED-Market Maker. — Aaron Michael C. Sy