THE Bureau of the Treasury (BTr) eyes offering its first-ever Retail Dollar Bonds (RDBs) in a bid to raise funds for the Philippine government’s recovery and resilience programs amid the prolonged Covid-19 pandemic.
Like the Retail Treasury Bonds being offered by the BTr, RDBs will also allow investors to mobilize their savings and earn while helping the government fund its programs. However, RDBs are US dollar-denominated instruments unlike the RTBs.
At a minimum placement of just $300, the potential RDB offering is also seen to be far more accessible than the traditional US dollar-denominated global bonds issued by the Philippine government which require a minimum subscription of $200,000.
On top of relatively higher returns, the RDBs are also expected to attract US dollar earners as the structure mitigates foreign exchange risk on the part of investors by maintaining the original currency of their investment. Should the RDB offering push through, the BTr said investors can choose whether to do a straight USD placement or through PesoClear wherein cash flows in RDBs are paid and received by an investor in PHP with the currency conversions done by the selling agent bank.
“We would like to increase investors’ capacity to further diversify their investments by offering us dollar-denominated instruments that can match the natural cash flows, especially by Filipinos in the USA. Investors are not only guaranteed a safeguard from potential FX risk or foreign exchange risk but more importantly, an opportunity to maintain the value of their hard-earned dollar savings,” National Treasurer Rosalia V. de Leon said in a virtual financial literary briefing in line with the intended offering of RTBs.
The national government will also assume the withholding tax on interest income to allow investors to earn full interest on their principal.
While the BTr has yet to finalize the details regarding the potential offering, de Leon said they plan to hold the auction for RDBs in August wherein the coupon rate is expected to be set.
“Again for our countrymen, these RDBs [will earn you] more than your usual time deposit with your banks because interest is low; you’re looking at US Treasuries, it’s just about 1.3 to 1.4 percent so similarly with our RTBs, this hard-earned money will also be earning more income and this time around we are offering new dollar-denominated bonds to preserve the value of your hard-earned money,” she said.
Aside from over-the-counter transactions for the possible offering, the BTr said it is looking to continue its digital push and explore the suitability of previous online channels such as its Online Ordering Platform, Bonds.PH and the Overseas Filipino Bank Mobile Banking Application, among others.
The national government programmed to borrow a total of P3.1 trillion this year, of which 80 percent is expected to be raised through domestic sources and the remaining 20 percent from foreign sources.
Outstanding debt of the national government as of end-May this year has already ballooned to a record P11.07 trillion, up by 13 percent from P9.795 trillion as of end-2020.
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