PH sets first retail dollar bond offering

The Philippines plans to issue its first-ever retail dollar bonds (RDBs) by mid-August to raise funds for COVID-19 response and tap more Filipino investors living or working overseas.

National Treasurer Rosalia de Leon told a virtual briefing on Thursday the US dollar-denominated securities would be offered in minimum denomination of only $300.

De Leon said the Bureau of the Treasury was still finalizing details of the issuance, including the bond tenor. The Treasury is also still resolving tax issues as these bonds will be settled onshore, she said.

As for the coupon, De Leon said it would be determined during the auction scheduled by the middle of next month. The yield will be aligned with the recent 10.5-year US dollar-denominated global bonds issued by the Philippine government, she added.

“Aside from relatively higher returns, the RDBs will particularly appeal to US-dollar earners as the structure mitigates foreign exchange risk on the part of investors by maintaining the original currency of their investment. The national government will also assume the withholding tax on interest income, allowing investors to earn full interest on their principal,” the Treasury said in a statement.

Also, the RDBs will allow small- and mid-sized investors to mobilize their savings and earn while helping fund the government’s recovery and resilience programs, it added.

The Treasury is planning to offer the RDBs through its online ordering platform, the mobile apps of Overseas Filipino Bank and Bonds.PH, as well as through banks.

“Investors will have the option of doing a straight US-dollar placement or through PesoClear wherein cash flows in RDBs are paid and received by an investor in Philippine peso with the currency conversions done by the selling agent-bank,” the Treasury added.

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 and institutional investors.

The RDBs will form part of the about P3-trillion in gross borrowings programmed for this year, of which 80 percent will be sourced from the domestic debt market.