The Bureau of the Treasury is planning to sell the Philippine government’s first retail dollar-denominated bond (RDB) targeted mainly at overseas Filipino investors.
During a virtual briefing on Thursday, July 15, National Treasurer Rosalia V. de Leon said the government is firming up the details of its maiden RDB offering, but already looking at a minimum investment of $300.
According to de Leon, RDB is far more accessible for retail investors than the traditional US dollar bonds issued by the government that require a minimum investment of $200,000.
She also said RDB has “relatively higher returns,” similar to the traditional peso-denominated retail bond (RTB) and “Premyo” bond.
“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,” de Leon said.
“The NG will also assume the withholding tax on interest income, allowing investors to earn full interest on their principal,” she added.
Convenient subscription options are open to RDB investors, the treasurer said.
Aside from over-the-counter transactions, investors may buy RDBs through online channels such as Online Ordering Platform, Bonds.PH and the Overseas Filipino Bank Mobile Banking Application.
“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,” de Leon said.
The Duterte administration’s planned maiden RDB sale follows the $3 billion global bonds sold in June, $2.5 billion euro-denominated bonds in April, and $500 million yen-denominated “Samurai” bonds in March.
This year, the government plans to borrow P3 trillion to bridge its projected budget deficit. As of May, gross financing stood at P1.713 trillion.
On Monday, Fitch Ratings revised the Philippines’ credit outlook to “negative” from “stable” due to the national government’s weakening fiscal finances brought about by the prolonged coronavirus pandemic.
However, the credit rater affirmed the country’s credit rating at “BBB,” which is one notch above the minimum investment grade.
Finance Secretary Carlos G. Dominguez III said the significant impact of the coronavirus on the country “will only be temporary,” while Bangko sentral ng Pilipinas Governor Benjamin E. Diokno said the drag caused by the pandemic is “transitory.”