Treasury eyes at least PHP 30B from retail bonds

The government is looking to raise at least P30 billion from its first retail Treasury bond (RTB) offering for 2024.

In a notice on its website, the Bureau of the Treasury (BTr) said it is planning to sell at a minimum PHP 30 billion worth of five-year RTBs due 2029 and allow existing holders to exchange the debt due this year for the new bonds.

The rate-setting auction is scheduled for Feb. 13.

The public offer period will run from Feb. 13 to Feb. 23, with the issue and settlement date on Feb. 28, the BTr said.

“The interest rate shall be based on current market levels of comparable securities rounded down to the nearest one-eighth (1/8) of one percent (1%),” the BTr said.

The final interest rate will be determined through a Dutch auction with the government securities eligible dealers. In a Dutch auction, the rate for the bond is determined by starting with the highest rate and incrementally lowering it until it is accepted by the auction participants.

This will be the government’s first RTB offering this year and the 30^th issuance overall.

Due to the RTB offer, the BTr will cancel the auction for seven-year Treasury bonds on Tuesday.

The RTBs will be sold in minimum denominations of PHP 5,000 and in multiples of PHP 5,000 thereafter, with a maximum investment amount of PHP 500,000.

The BTr is also offering a bond exchange option for holders of RTB 03-11, maturing on March 9, 2024, and RTB 05-12, maturing on March 12, 2024. The exchange offer also runs from Feb. 13 to 23.

“The exchange offer is likewise intended to manage refinancing risk in the debt portfolio of the Republic and is an integral part of its overall liability management program,” the BTr said.

Each exchange offer will have a minimum amount of PHP 5,000 in multiples of PHP 0.01.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that demand for the RTBs could be high as yields at the secondary market remain elevated.

It could also be a “sweet spot” for investors as easing inflation recently could lead to rate cuts by the Bangko Sentral ng Pilipinas (BSP) this year, he added.

Yields of the five-year bonds at the secondary market stood at 6.1053%, based on data from the PHP Bloomberg Valuation Service Reference Rates posted on the Philippine Dealing System’s website on Monday.

On the other hand, Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said the rate for the RTB will likely be lower than secondary market rates “as demand from retail and institutional clients continue to be robust for these types of offerings.”

“Timing will probably be pretty soon considering that the US Federal Reserve is signaling that it may not be able to cut in their March meeting given strong labor and growth prints,” he added.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year or P1.39 trillion. — AMCS