Retail dollar bond offer to start on Wednesday

The government is set to launch on Wednesday the first dollar-denominated bond offering targeting retail investors under the Marcos administration.

In a notice on its website, the Bureau of the Treasury (BTr) said it will hold a price-setting auction for the five-and-a-half-year onshore retail dollar bonds (RDB) on Sept. 27.

The bonds will also be offered to the public starting Sept. 27 until Oct. 6.

The issue date is set for Oct. 11. The bonds will mature on April 11, 2029.

The BTr set the minimum issue size at USD 200 million, although Finance Secretary Benjamin E. Diokno earlier said the government will try to raise $1 billion from the RDB offering.

“I think initially (the size is) USD 1 billion, but the demand for the offering is too big. Maybe we can upsize,” Mr. Diokno said on Friday.

This would be the Philippines’ second RDB issuance but the first one under President Ferdinand R. Marcos, Jr. The first offering raised USD 1.6 billion in 2021, under the Duterte administration.

“The RDBs shall be issued in scripless form and will be sold during the public offer period in minimum denominations of USD 200 (around P11,400) and multiples of USD 100 (PHP 5,700) after,” the BTr said.

To encourage more investors, the RDBs will be exempted from taxes, such as the final withholding tax on coupon payment and documentary stamp tax on original issue.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the yields for RDBs could range from 5.2% to 5.4%, similar to previously issued offshore dollar bonds in the secondary market.

“The relatively higher interest rates/yields for the RDBs could be attractive for retail investors and could lead to strong demand given the low minimum amount to enjoy the higher interest rates, especially if the investors hold the bonds until maturity to prevent market risk and enjoy the relatively higher coupon/interest rate income,” he said in a Viber message.

China Banking Corp. Chief Economist Domini S. Velasquez said she expects decent demand for the RBDs as “its rate will be higher than what we have seen in recent years.”

“The relatively small amount to enter the RDB market will prompt retail investors to take advantage of the issuance,” she said in a Viber message.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the timing of the RDBs aligns with market conditions.

“The flexible tenor options, lower minimum denomination, and plans for Sukuk bonds should make these offerings more attractive to a broad range of investors,” Mr. Roces said in a Viber message.

Investors can order and purchase the new subscriptions to the RDBs through the BTr Online Ordering Facility on its website and settle through electronic payment facilities of China Banking Corp., Land Bank of the Philippines. (LANDBANK), and Metrobank via First Metro Securities Brokerage Corp.

Other online channels for the RDBs include Bonds.ph, and the mobile banking apps of Overseas Filipino Bank and LANDBANK.

The BTr is also targeting to launch Sukuk bonds within the fourth quarter this year. Mr. Diokno said that the Sukuk bonds will likely have an offer size of USD 1 billion. This would also mark the Philippine government’s first issuance in the Islamic bond market.

This year, the government’s borrowing plan is set at USD 2.207 trillion, consisting of PHP 1.654 trillion from domestic sources and PHP 553.5 billion from foreign sources. — A.M.C.Sy