Treasury eyes sale of P500B in retail bonds

The Bureau of the Treasury has sought the approval of Malacañang to sell as much as P500 billion worth of retail treasury bonds (RTBs) in the local capital market to meet a significant and sustained demand for the securities.

Deputy Treasurer Eduardo Mendiola said the Treasury was inclined to make the sale of RTBs a regular activity, noting that demand for these securities has been significant over the past few years. Investors have been selling RTBs in the secondary market in significant volumes, thus necessitating the need for more supply of said securities.

“Investors are becoming used to trading RTBs, which have become a common trading commodity in the secondary market,” Mendiola said in a briefing Tuesday after the auction for seven-year treasury bonds.

Unlike regular treasury bonds, RTBs are tailor-fit for individual and small investors as the minimum investment requirement for these securities is just P5,000.

Should the Palace give its go-ahead on time, Mendiola said the Treasury could sell in October another set of RTBs. After the planned sale in October, the Treasury may schedule regular auctions in 2012 for these securities.

Mendiola said the Treasury was considering selling in October between P35 billion and P40 billion in RTBs with a long-term tenor of 10 or 20 years.

There are significant amounts of RTBs in the secondary market with maturities of less than 10 years and selling instruments of long-term tenors would be prudent, Mendiola said.

In February this year, the government sold P103 billion worth of RTBs with five- and 10-year maturities. The five-year RTBs fetched 6 percent while the 10-year paper yielded an interest of 7.375 percent.

Treasury officials said the sale of RTBs was not only meant to help the government raise funds to plug the deficit and help cover its expenditure requirements, but also to encourage individuals and small businesses to engage in an investment activity.

Although RTBs may also be bought by large corporate entities, the government prioritizes retail investors in the sale of these securities.

Proceeds from the sale of RTBs earlier this year and the one scheduled in the fourth quarter are meant to help the government settle its maturing obligations for the year.