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By Chino S. Leyco Reporter
THE Philippines raised billions
of pesos on Friday with the auction of retail Treasury bonds (RTBs),
which are IOUs meant to be sold to small investors.
Unlike regular T-bonds, RTBs
cater to small investors because they can buy the investment
instrument for as little as P5,000.
The Bureau of Treasury accepted
P4.681 billion worth of bids for the five-year IOUs, and P4.443
billion bids for the three-year debt papers. Banks, however, were
willing to buy as much as P22.404 billion of the government
securities, or nearly three times more than the planned P8 billion
issuance.
The auction committee had a
longer time assessing the bids for the three-year RTBs. “The three
and the five year were very well bid. [They were] good and
reasonable bids—good for small investors already,” National
Treasurer Roberto Tan, said.
“There is a lot of demand out
there. We expected good demand from this issue. These are the ones
that came in securing longer term investments and I would expect the
ones who redeemed their money on July 1, will also participate in
this, as well as the others that have been waiting for better
rates,” Tan said.
The market was expecting yields
for RTBs to hit the double-digit level after the Monetary Board
raised its key policy rates by 50 basis points Thursday, as well as
its inflation forecast to a range of 9 percent to 11 percent from
the previous 7 percent to 9 percent. The coupon rates for the three-
and five-year RTBs were set at 8.5 percent and nine percent,
respectively.
Besides its higher inflation
forecast this year, the Bangko Sentral ng Pilipinas’ policy-making
body also said that double-digit inflation would persist well into
the first quarter next year.
Tan said the half a percentage
increase in interest rates by the central bank had already been
factored in.
In line with the new RTB
offering, the government decided to scrap two remaining T-bond
auctions this month, with a combined issue size of P14 billion.
The government last sold RTBs
last year, raising P77.65 billion in three- and five-year debt
papers.
The RTB issuance came a day after
the Department of Finance said that it may forego a fresh round of
commercial borrowing abroad, citing the weak pace of government
spending.
The government ended the first
half of the year with a budget deficit of P18 billion, or well below
the P41 billion ceiling for the period. Besides weak spending, the
Finance department ascribed the better fiscal number on higher
revenue collections by the Bureaus of Internal Revenue and of
Customs.
The government is banking on
higher collections to finance its subsidies to the poor in light of
high inflation and an economic slowdown. It earlier pushed back to
2010 a plan to balance its budget due to this subsidy program.
The Finance department said the
government is likely to end this year with a budget deficit of P40
billion to P75 billion as a result of higher subsidies and other
pump-priming expenditures.
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