$866M raised from PH’s maiden retail dollar bonds sale

The Bureau of the Treasury on Wednesday raised an initial $866.2 million from its first-ever sale of retail dollar bonds (RDBs) to small investors.

During the rate-setting auction, the Treasury accepted $551.8 million out of the $607.8 million offered for the five-year RDBs, which fetched a coupon rate of 1.375 percent.

The Treasury also awarded $314.4 million out of the $330.4 million tendered for the 10-year dollar-denominated bonds, which were sold at a coupon of 2.25 percent.

The total award during the first day of RDB offer was more than double the minimum of $400 million which the Treasury was targeting to raise from this debt paper.

National Treasurer Rosalia de Leon said they were “happy with the results of the maiden offering for RDBs.”

De Leon said the rates “reflected various considerations for pricing, including the performance of ROPs (sovereign dollar bonds), liquidity and worries on US rates’ lift-off.”

De Leon declined to say how much in RDBs the Treasury was targeting to sell until Oct. 1. “We need two weeks [to offer RDBs] since we need to throw the net far and wide to catch more [investors],” she said. Settlement will be on Oct. 8.Onshore investors

The Treasury did not have estimates on the ratio of possible domestic against overseas-based buyers, but De Leon said they expected more onshore retail investors.

Investors can purchase these bonds in minimum denomination of $300, and multiples of $100 thereafter. Investors can buy using their US dollar accounts or through the PesoClear option for their existing Philippine bank accounts.

PesoClear will pay the peso equivalent of the RDBs’ face amount based on prevailing market exchange rates. Before the bonds mature, the investors’ settlement banks will automatically convert the quarterly interest payments and principal repayment at maturity into pesos, plus credit these to the investors’ Philippine account at the market exchange rate during the transactions, De Leon explained.

The Treasury will make these RDBs available through online channels such as the ordering facility on its website and its newly launched mobile application.

RDBs can also be bought from the mobile banking apps of Land Bank of the Philippines (Landbank), Overseas Filipino Bank and Union Bank of the Philippines’ Bonds.ph app.

Financial inclusion

In a statement, Landbank said that for its peso account holders who wanted to invest in RDBs, the state-run lender “will facilitate the currency conversion of peso to US dollar to access the bonds, including the interest and principal payments.”

“The Philippines’ first-ever onshore RDB offering not only supports the development of our capital markets but also helps fulfill President Duterte’s goal of financial inclusion among Filipinos,” Finance Secretary Carlos Dominguez III said during the launch.

“The RDBs will offer our small investors an outlet for diversifying their investment portfolios. They do not need to keep their dollar holdings in deposit accounts that pay minimal interest. With a minimum investment of just $300 or about P15,000, small investors can now grow their US dollar savings,” he added.

Through the mobile apps, “Filipinos, especially our overseas Filipino workers, can now make investments in government securities without having to pay out huge commissions to brokers and traders,” Dominguez said, such that “investing in bonds becomes seamless and nearly friction-free.”