Treasury plans second RTB sale, domestic debt exchange

The government could issue at least P60 billion worth of retail treasury bonds (RTBs) by November or earlier, Deputy Treasurer Eduardo Mendiola said Wednesday. "I would be happy if we get P60 billion and not less than that," he said. RTBs are debt papers issued by the government for as low as P5,000. These instruments are ideal options for retail investors who want to park their funds in government debt papers. Is it the government's plan to issue RTBs in two batches – one in the first half of the year and the other in the second half – given the strong demand from retail investors. Asked if the government can top the last RTB sale in February, which brought in P179.9 billion, Mendiola said it all depends on market demand. He is already in talks with 10 banks for proposals on how to go about the debt sale. Mendiola said the government wants to issue 25-year RTBs to make it easier for the government to manage its liabilities. He said that as seen in the February RTB debt sale of 15-year and 20-year bonds, investors are already starting to feel comfortable parking their funds in long-term debt knowing they can sell this anytime in the secondary market. RTBs are also attracting institutional investors who want safe havens for their investments. After the planned RTB sale, the government will embark on a domestic debt exchange. "Definitely the [debt] exchange will be in November," said Mendiola. Under the plan, the government will exchange outstanding shorter-dated debt in the market with longer-dated papers. Mendiola is also in talks with another group of 10 banks regarding the exchange. "The plan is to issue benchmark bonds — 7-, 10-, 15-, 20- and 25-year bonds," he said. The government currently has roughly P2.9 trillion in outstanding debt, some of which are illiquid bonds or those that trade a lot less frequently than other bonds. The last time the government did a domestic bond exchange was in July 2011, when investors offered to swap P323.5 billion worth of bonds for debt maturing in 2022 and 2031. Total accepted tenders amounted to P292.5 billion. The average national government debt maturity lengthened to 10.18 years in 2011 as a result of the government’s debt liability management efforts. The latest debt maturity profile is an improvement from the 8.8 years recorded in 2010 and the longest average maturity achieved since at least 2001, data from the Finance department showed. Specifically, the average maturity of domestic debt stretched to 9.21 years as of last year from 6.7 years while the average maturity of foreign obligations extended to 11.36 years from 11.34 years. — BM, GMA News