$866M raised from maiden RDB issuance

THE government has generated an initial $866 million (about P43.23 billion) from the Wednesday opening of its first retail dollar bond (RDB) offering, according to the Bureau of the Treasury (BTr).

The BTr accepted $314.40 million of the total $330.40 million bids for the 10-year tranche, auction results showed. It also accepted $551.80 million for the five-year tranche, out of a total of $697.80 million offered.

Small investors can purchase the RDBs for as little as $300 with a coupon of 2.250 percent for the 10-year tenor and 1.375 percent for the five-year tenor.

RBDs will be offered from September 15 to October 1 this year. Settlement is on October 8 this year.

National Treasurer Rosalia de Leon was quoted in a statement by the Department of Finance as saying that the Treasury has teamed up with the country’s leading banks to allow small investors to buy RDBs on favorable terms.

Several banks have agreed to set the minimum initial deposit and average daily maintaining balance requirements to zero for those interested in purchasing these US dollar-denominated securities.

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Banks would do away with their current practice of requiring depositors to open dollar accounts with a minimum balance of $500 to $1,000 before they could invest in RDBs under this plan to democratize dollar-bond investing.

De Leon went on to say that in order to reach the broadest investor base, the bureau developed two accounts for people to invest in RDBs: a direct US dollar account and a PesoClear account.

Those who want to invest in RDBs in US dollars straight must open US dollar accounts with a local participating bank, which will serve as the cash settlement account where the interest earnings and principal repayment at maturity will be credited to the investor, she explained.

In addition to waiving the usual requirements for opening dollar accounts, de Leon stated that several banks have agreed to make it easier and safer for RDB investors to open US dollar accounts without having to physically visit their branches.

Investors who do not have US dollar accounts can purchase RDBs using their existing Philippine bank accounts using the PesoClear option.

The investor will pay the peso equivalent of the face value of the RDBs in the initial investment, based on current market exchange rates. Throughout the life of the RDBs, the investor’s settling bank will automatically convert quarterly interest payments and principal repayments at maturity into pesos and credit them to the investor’s Philippine account, all at the current market exchange rate.

De Leon remarked during the launch that the RDBs are a unique financial product since they are far more affordable than global bonds, which require a minimum investment of $200,000.

“Together with providing good access RDBs response to the call for diversification of investments of our retail sector and contribute more to the government’s development efforts,” she emphasized.

For his part, Finance Secretary Carlos Dominguez 3rd said the country’s first RDBs will provide small investors with a way to diversify their portfolios.

“They do not need to keep their dollar holdings in deposit accounts that pay minimal interest. With a minimum investment of just $300 or about P15,000, small investors can now grow their US dollar savings,” he highlighted.

Dominguez noted that the government will take advantage of digital platforms to make it easier for investors to purchase these bonds via the Bonds.PH app, the mobile apps of the Overseas Filipino Bank and the Land Bank of the Philippines, and the Treasury’s online ordering system.

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