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Manila Bulletin devider Business devider Retail dollar bond offer raises $1.26-B

Retail dollar bond offer raises $1.26-B

Published Oct 8, 2023 09:01 pm

At A Glance

  • President Marcos' maiden retail dollar bond (RDB) sale raised $1.26 billion, exceeding the target of $1 billion.<br>However, the proceeds from the RDB issuance were lower compared to the first offering in 2021, but the two issuances are not directly comparable as they had different structures.<br>Deputy Treasurer Erwin D. Sta. Ana reported that the government raised $649 million during the 10-day offer period from Sept. 27 to Oct. 6.<br>The Bureau of the Treasury previously raised $611 million through a price-setting auction on Sept. 26, with total demand from banks reaching $636.2 million.<br>The Department of Finance (DOF) is preparing for a $1 billion issue of Sharia-compliant or Sukuk bonds, planned to be launched by the end of November.<br>The Philippines' Sukuk bonds will have a hybrid structure, with 50 percent being asset-backed.<br>The Philippines has already selected the lead managers for the Sukuk bonds offering.

President Marcos' first retail dollar bond (RDB) sale successfully raised $1.26 billion, demonstrating a positive response from the public despite the current market conditions, the Department of Finance (DOF) said.

During the Chat with SBED briefing on Friday, Oct. 6, Finance Secretary Benjamin E. Diokno announced that the government surpassed its target of $1 billion for the second RDB issuance.

However, the proceeds from the Marcos administration's 5.5-year retail dollar issuance were lower in comparison to the first RDB issue in 2021, which raised $1.6 billion.

However, Diokno clarified that these two issuances are not directly comparable. This year's RDB was a single-tier offering, whereas the previous issuances consisted of five-year and 10-year IOUs.

Deputy Treasurer Erwin D. Sta. Ana said the government raised $649 million during the 10-day offer period from Sept. 27 to Oct. 6.

To recall, the Bureau of the Treasury generated $611 million through the price-setting auction on Sep. 26, with total demand from banks reaching $636.2 million.

The 5.5 year RDBs were issued with a coupon rate of 5.750 percent.

“We awarded every offering during the public offer period,” Sta. Ana told reporters. “I think this is a very good turnout, considering the current market conditions.”

RDBs are a type of government investment that provides individuals with a fixed interest rate over a specific period and guarantees the return of their initial investment at maturity.

The minimum investment requirement for the RDB has also been reduced from $300 to $200.

The Marcos administration faced challenges with the inaugural dollar retail treasury bond sale, which was initially planned for December 2022. 

It was subsequently postponed to the second quarter and then rescheduled again to the third quarter due to unfavorable market conditions.

Following the successful RDB sale, the DOF is now preparing for the maiden issuance of Sharia-compliant or Sukuk bonds, with a targeted launch by the end of November.

Diokno said the Sukuk bonds will be primarily offered to institutional investors in Abu Dhabi.

Sukuk bonds are financial instruments that adhere to Islamic laws by avoiding the concept of interest and instead linking returns to tangible assets or properties.

Investors who hold Sukuk bonds receive a portion of the earnings generated by the underlying assets.

Sharon Almanza, the Officer-in-Charge of the Bureau of the Treasury, said the Philippines' Sukuk bonds will have a hybrid structure, with 50 percent of the bonds being backed by assets.

Diokno said the DOF has already selected the lead managers for the Sukuk bonds offering.

Related Tags

retail dollar bond Deputy Treasurer Erwin D. Sta. Ana Finance Secretary Benjamin E. Diokno Bureau of the Treasury
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