The government is planning to raise more funds with its first-ever retail dollar-denominated bond (RDB) offering by mid-August, mainly targeting overseas Filipinos.
National Treasurer Rosalia V. de Leon on Thursday said the Bureau of the Treasury (BTr) will be launching the onshore RDBs to provide a safe investment opportunity for small investors and overseas Filipino workers (OFWs) as these would carry higher rates.
Ms. De Leon said the new bonds would help investors diversify their portfolio and preserve the value of their money from potential foreign exchange risks.
The RDBs will be available at a minimum investment of $300 (P15,000), making it more accessible to retail investors compared with the usual dollar-bond issuances of the government to institutional investors that require at least $200,000 worth of subscription.
The rates and tenor of the bonds will be determined in an auction in mid-August. To make the new debt papers attractive, the coupon will be computed based on prevailing market rates for the tenor, plus a premium since it is a maiden offer.
The government will also assume the withholding tax on interest earned.
Proceeds from the proposed fundraising activity will be used to fund the government’s recovery and resilience programs, as well as big-ticket infrastructure projects.
Investors would be able to purchase these RDBs through selling agent banks using either US dollar or Philippine peso currencies. For the latter, selling agents will be the one converting the peso to dollar to access the bonds, and in converting the interest and principal payments from dollar to peso.
“Whether or not it is attractive to retail investors will depend on the yield; from an access standpoint, it is certainly attractive. Outside of fund vehicles, direct USD-denominated instruments have notoriously high capital requirements/minimum lot sizes,” a trader said via e-mail on Thursday when asked to comment.
The notes can be directly purchased from the physical branches of participating banks, as well as through digital platforms via the BTr’s website, Bonds.PH mobile application, and the Overseas Filipino Bank’s online bank.
“While the RDB is a new product offered during these extraordinary times, we are confident that with the insights and feedback of our fellow kababayans, we will be one step close in further strengthening of inclusion and financial literacy for the ordinary Filipinos,” Ms. De Leon said.
The last time the BTr offered onshore dollar-denominated bonds was in December 2012, when it raised $500 million in 10.5-year bonds from $1.7 billion in total bids, Jose Angelo Abad, senior manager at the Development Bank of the Philippines said during the briefing.
The issuance, however, was only available to institutional investors back then at a coupon of 2.75% per annum. The notes will mature on June 4, 2023.
Similar to the proposed RDB is the peso-denominated retail Treasury bonds (RTBs) that the government offers each year to attract small investors to invest in these safe-haven assets at relatively higher rates.
In March, the BTr raised P463.3 billion in three-year retail bonds to mark its second-biggest RTB sale in history, following the record P516.3 billion sold in five-year bonds last year.
The government aims to raise P3 trillion from local and foreign lenders this year to plug the budget deficit seen to widen to 9.3% of gross domestic product.
It sources 80% of its borrowings from the domestic debt market through Treasury bills, bonds and other loans to minimize foreign exchange risks.