Philippines to tap retail bond market to repay debts

THE Philippine government is returning to the retail bond market this month to repay maturing debts, taking advantage of ample cash in the financial system and easing inflation.

The Bureau of the Treasury will hold a price-setting auction for an initial tranche of least 30 billion pesos (S$718.6 million) on Feb 13, officer-in-charge Sharon Almanza said in a notice of offering on Tuesday (Feb 6).  The five-year bond will be offered to the general public simultaneously with an invitation to exchange eligible bonds with the new issue.

Finance Secretary Ralph Recto last month said that a retail bond sale is part of the government’s “strategic financing programme” for the year, when it will need to raise 2.46 trillion pesos from foreign and local sources.

Bond sales to retail investors are a big source of financing for the Philippine government, which uses the funds to plug a budget deficit and repay debts. The first of such borrowing under President Ferdinand Marcos Jr raised 420.4 billion pesos in 2022.

The auction next week takes place amid signs the Philippine central bank is getting closer to the end of its monetary tightening cycle as headline inflation eases, which will allow investors to lock in higher returns.

Retail bonds are typically offered in small denominations of 5,000 pesos, making them accessible to a large base of savers. In previous sales of such bonds, the treasury also initially offered 30 billion pesos and ended up raising multiples of that amount. BLOOMBERG