Premyo bond sale a hit

By: - Reporter / @bendeveraINQ
/ 05:38 PM December 02, 2019

The sale of so-called premyo bonds, a kind of debt paper unique to the Philippines, was a hit as more than half of P3 billion worth of these bonds were snapped up by mostly individual investors.

It was just the first week of premyo bond sale.


The traditional T-bill was also a hit, too.

The Bureau of Treasury reported selling all P20 billion worth of T-bills on Monday, Dec. 2, even as rates for two tenors—91 and 182-day maturity—increased.


At Monday’s auction, the Treasury parted with P8 billion of benchmark three-month debt papers at an average of 3.192 percent, up from 3.168 percent.

It also sold P6 billion in six-month government securities at 3.348 percent, up from 3.249 percent two weeks ago.

National Treasurer Rosalia V. de Leon told reporters after the auction that the higher rates for shorter tenors was driven by market expectations of higher inflation in 2020 after it hit rock bottom at 0.8 percent in October.

At least P6 billion in 354-day T-bills fetched an annual rate of 3.475 percent, down from 3.501 percent.

De Leon said investors in the longest T-bill tenor were going after higher yield as the financial system was awash with cash following reductions in banks’ reserve requirement, or amount of cash they need to keep intact, and recent maturity of P190 billion in debt papers.

In response, the Treasury opened its taps for one-year T-bills as bids for these were almost four times oversubscribed.

De Leon said the Treasury wanted to raise P6 billion from the over-the-counter facility, which the Treasury opens whenever it decides to sell more securities to meet excess demand.


Across the three tenors, tenders totalled P40.4 billion, making the auction over two times oversubscribed.

De Leon said the Treasury was “very encouraged by the reception” to its premyo bonds, especially among individuals—some of whom had to open deposit accounts to buy the unique debt papers.

A week after offering the premyo bonds on Nov. 25, De Leon said the Treasury already sold more than half of the P3-billion offer, with about 85-90 percent of the buyers being individuals.

A growing number of individual investors is buying premyo bonds online through the Development Bank of the Philippines, Land Bank of the Philippines and accredited seller First Metro Securities Brokerage Corp.

Other accredited sellers of premyo bonds included BDO Unibank Inc., BDO Capital and Investment Corp., China Banking Corp., China Bank Capital Corp., First Metro Investment Corp. and Metropolitan Bank and Trust Co.

Given the reception so far, De Leon said the Treasury “would like to do it again.”

De Leon said the Treasury had to determine if the offer volume could still be upsized.

The offer period will be until Dec. 13.

Premyo bonds will give investors a chance to win up to P1 million and non-cash prizes such as a condominium unit or a house-and-lot during quarterly raffles.

Each premyo bond costs P500, and can be bought in such multiples for a maximum of 20,000 bonds or P10 million per bondholder.

Premyo bonds that would be issued this coming Dec. 18 would mature one year later, Dec. 18, 2020.

The interest rate of 3 percent will be subject to 20-percent final tax.

Edited by TSB
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