Gov’t to sell retail bonds worth P30B

The government is set to sell retail treasury bonds (RTBs) in August to generate funds for its expenditure requirements and provide investment opportunities for small investors.

In a notice to government securities-eligible dealers, the Bureau of the Treasury said it would sell P30 billion worth of 10-year RTBs as part of its fund-raising program for the third quarter.

The price-setting auction for the RTBs will be held on July 30, while the sale of the said securities will run in the following days until the target amount is raised.

Earlier, National Treasurer Rosalia de Leon said the government was poised to offer RTBs again this year, consistent with its desire to promote the value of investing to the public.

Unlike regular treasury bills and bonds, RTBs are fit for individuals and small investors as the minimum investment required is only P5,000.

In the meantime, the BTr also said in its notice that the government was planning to raise a total of P150 billion from the domestic capital market in the third quarter  through the sale of government securities.

Proceeds of government borrowings are used to meet its expenditure requirements that cannot be covered by tax and non-tax revenues and to pay maturing obligations.

Under the borrowing its schedule, the BTr will sell P60 billion worth of T-bills (short-term government securities) and P90 billion worth of treasury bonds (government securities with maturity of more than one year). The latter includes the P30 billion worth of RTBs.

The BTR will continue holding one T-bill and one T-bond auction per month.

In each of the monthly T-bill auction, the government intends to sell P4 billion worth of 91-day bills, P6 billion worth of P182-day bills and P10 billion worth of 364-day bills.

In each of the monthly T-bond auction, the government is scheduled to sell P30 billion worth of debt paper. It will sell 3-year bonds in July, 10-year RTBs in August and 5-year bonds in September.

The government intends to raise the bulk of its borrowing requirements for this year from the domestic capital market.

De Leon also said borrowing more from the domestic market and less from foreign creditors was meant to reduce the government’s exposure to foreign exchange risks.

She said borrowing more from domestic sources was also meant to take advantage of the low-interest rate environment in the country.

The government’s borrowing program is consistent with the government’s fiscal target. In particular, the government aims to limit its budget deficit for this year at or below P238 billion, which is equivalent to 2 percent of the country’s expected gross domestic product (GDP) for the year.

The deficit-to-GDP target ratio for this year is better than the 2.3 percent last year.

According to the Department of Finance, head agency of the BTr, the government’s improving finances have helped reduce its debt burden. The government’s outstanding debt now stands a little below 50 percent of the country’s GDP, which is, by international standards, considered manageable.

The country’s debt-to-GDP ratio peaked at 74 percent in 2004.

Finance officials said the improving deficit-to-GDP and debt-to-GDP ratios were partly credited for the country’s attainment of investment grades. The Philippines earlier this year has been assigned the minimum investment grades by Fitch Ratings and Standard & Poor’s.