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THE GOVERNMENT is aiming to generate P200 billion from its inaugural retail Treasury bond (RTB) issuance this year, which it could initiate within this quarter, Finance Secretary Ralph G. Recto mentioned.
“I believe we’ll launch the retail Treasury bonds now. I think this quarter, within the quarter,” Mr. Recto informed reporters last week.
He refrained from providing further specifics.
The government’s previous RTB issuance occurred in February 2024. It garnered a record P584.86 billion from its offering of five-year RTBs.
RTBs are medium- to long-term debt instruments issued by the government, accessible to retail investors, particularly ordinary Filipinos. They are typically sold in minimum denominations of P5,000.
Mr. Recto remarked that the forthcoming RTB issuance will probably not be the final one this year.
Analysts anticipate a strong demand for the new RTB offer, noting favorable yields and accessibility, while suggesting that a tenor of five years might be most suitable.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, indicated that the RTB offering is likely to draw significant investor interest.
“RTBs continue to be appealing due to their accessibility for retail investors, relatively high yields in comparison to savings products, and their status as low-risk instruments,” Mr. Asuncion stated in a Viber message.
Last May, National Treasurer Sharon P. Almanza revealed that the Bureau of the Treasury (BTr) intends to launch GBonds, enabling retail investors to buy and trade government securities on e-wallet giant GCash by the latter half of the year.
This will permit the platform’s 94 million registered users to invest a minimum of P5,000 for RTB and P500 for Treasury bills through the application.
“A tenor of 5 to 7 years would be appropriate, striking a balance between competitive returns and manageable duration risk, while aligning with the government’s medium-term funding strategy,” Mr. Asuncion remarked.
Meanwhile, a trader noted that strong demand is anticipated for this issuance, “given that the target is lower than the expected maturity.”
“If the yield is sufficiently attractive, I believe the BTr can issue up to P400 billion,” the trader expressed in a Viber message.
It also added that a tenor of 5 to 5.5 years would be fitting for the issuance.
The government aims to increase its borrowing program to P2.6 trillion this year, up from P2.55 trillion previously, to address the expanding budget deficit.
It continues to target 80% of its borrowings sourced domestically and 20% externally.
The latest Treasury data indicated that the National Government’s gross borrowings decreased by 6.67% to P1.33 trillion in the five-month duration this year.
Domestic gross borrowings dropped by 12.74% year on year, totaling P1.02 trillion.
TWO MORE RATE CUTS
Meanwhile, Recto, who also serves on the Monetary Board, mentioned that the Bangko Sentral ng Pilipinas (BSP) has the capacity to implement two additional 25-basis-point (bp) rate reductions this year amidst low inflation.
“I believe the BSP is clear that we anticipate a 50-bp rate cut all the way until the year’s conclusion,” Mr. Recto said, adding that these will likely occur in two increments.
“Inflation is currently low,” he added.
Headline inflation averaged 1.8% during the six-month period.
The remaining policy meetings of the central bank are scheduled for Aug. 28, Oct. 9, and Dec. 11.
BSP Governor Eli M. Remolona, Jr. previously indicated two additional rate cuts in 2025, referencing inflation falling within the 2-4% target and anticipating slower economic growth.
At its June 19 meeting, the central bank executed a second consecutive 25-bp cut this year, lowering its policy rate to 5.25%.
It has now reduced interest rates by a total of 125 bps since initiating its easing cycle in August 2024.
However, Mr. Recto expressed that the government remains cautious ahead of the Federal Reserve’s policy meeting later this month.
“We are uncertain about what might happen in the US at this moment. We’ll be closely watching that as well,” he stated.
US President Donald J. Trump has been urging Federal Reserve Chairman Jerome H. Powell to lower borrowing costs, aiming for a 1% policy rate.
However, recent US inflation statistics may complicate the Fed’s easing path. The US consumer price index rose to 2.7% from a year earlier in June, following an increase to 2.4% in May.
“Trump desires to change the Fed, right? He is seeking a rate cut. That’s the situation there. But for us, observing our own inflation data, it looks favorable thus far,” he stated.
When asked if the central bank would continue with easing even if the Fed maintains rates, Mr. Recto replied: “I think we have the room to cut.”
“Perhaps not two cuts, depending on what occurs in the US as well. But for now, I would assume that we’re positioned for two rate cuts.” — Aubrey Rose A. Inosante
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