The government accepted bids for P100 billion worth of 10-year retail treasury bonds (RTB) yesterday amid high demand for the risk-free IOUs in the country’s highly liquid market.
The bids accepted were more than three times the planned offer size of P30 billion. National Treasurer Rosalia de Leon told reporters that the government might sell more during the offer period that ends on Aug. 13.
At 3.25 percent, the coupon rate for the RTBs offered Tuesday was lower than the previous rate of 3.41 percent.
“I suppose the banks can see that they can still sell the bonds (despite the low rate),” De Leon told reporters after the auction. She said the Bureau of the Treasury decided to accept more bids to allow the rates to increase, making them more attractive to local investors.
If the government had stuck to its plan to issue just P30 billion, the coupon rate would have been 3 percent.
Bids for the RTBs reached P271.8 billion and the Treasury initially considered accepting P150 billion, but reverted to P100 billion.
The Treasury requires banks to earmark 20 percent of the RTBs issued them to retail investors to increase the participation of small players in the local debt market. “They should (comply with the 20-percent minimum). Otherwise, they will be sanctioned,” de Leon said.
In a separate statement Tuesday, De Leon said the RTB issuance would give banks a new option given the recent restrictions on the access of individual depositors to the central bank’s special deposit accounts (SDA).
“The government wants the ordinary retail investor to have easier access to risk-free debt paper that offer higher yields compared with ordinary time deposits and SDAs,” she said. “The issuance of RTBs, which is scheduled on Aug. 15, is also timely as excess liquidity coming from exiting SDA placements is expected to plow into the very liquid domestic market.”
Despite the plan to increase the amount of accepted bids for RTBs, De Leon said the government would not exceed the P188 billion that was issued last year.