Return to ECQ delays first-ever retail dollar bonds sale
MANILA, Philippines—With Metro Manila currently on lockdown, the Bureau of the Treasury has delayed its plan to sell retail dollar bonds (RDBs) to small investors here and abroad for the first time this month.
National Treasurer Rosalia de Leon told reporters on Monday (Aug 9) that while the Treasury still wanted to launch the RDBs within this year, it can no longer do so in mid-August as earlier planned.
“We will adjust with the ECQ. We will also monitor market developments,” De Leon said, using initials for enhanced community quarantine, the stringest form of COVID lockdown in the Philippines. She added it was “not certain” yet if the RDB issuance could push through within this quarter.
In a statement also on Monday, the Department of Finance (DOF) said some banks already committed to support the Treasury’s forthcoming RDB sale after they “agreed to set the minimum initial deposit and average daily maintaining balance requirement to zero for those who would want to purchase these US dollar-denominated securities.”
“Banks would do away with their current practice of requiring depositors to open dollar accounts with a minimum balance of $500-1,000 before being able to invest in the RDBs,” the DOF quoted De Leon’s recent report to Finance Secretary Carlos Dominguez III.
“We are planning to make the RDBs available to individual investors at a minimum amount of only $300, significantly lower than the minimum amount for investing in traditional Philippines’ US dollar-denominated bonds of $200,000,” De Leon told Dominguez.
De Leon said the Treasury will introduce two types of accounts for possible RDB investors: the straight US dollar, as well as PesoClear.
“Those who wish to invest in RDBs through the straight US dollar method would need to open US dollar accounts with a local participating bank that will serve as the cash settlement account where the interest earnings and the principal repayment at maturity will be credited to the investor,” De Leon said.
“Aside from waiving the usual requirements on the opening of dollar accounts, several banks have committed to make it easier and safer for investors of the RDBs to open US dollar accounts without having to physically go to their branches,” De Leon added.
The PesoClear option would allow investors to use their existing Philippine bank accounts to buy RDBs. “In the initial investment, the investor will pay the peso equivalent of the face amount of the RDBs based on the prevailing market exchange rates,” De Leon said.
“During the life of the RDBs, the investor’s settlement bank will automatically convert the quarterly interest payments and principal repayment at maturity into pesos and credit these to the Philippine account of the investor, all at the market exchange rate during the transactions,” De Leon explained.
De Leon said the RDBs will be made available on the Treasury’s online ordering facility as well as the mobile apps of the Overseas Filipino Bank (OFBank) and Bonds.PH.
These past weeks, the Treasury also conducted online seminars for Filipinos living or working in about 20 countries abroad to pitch the RDB as a viable investment. The proceeds from the RDB issuance will be spent on COVID-19 response amid the prolonged pandemic.
In 2012, the Treasury issued $500 million in 10.5-year US dollar-denominated bonds onshore, but these were sold only to government financial institutions (GFIs) and institutional investors.
