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Government to stop issuing short-term Treasury bills |
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By Des Ferriols
The Philippine Star 02/20/2006 As the domestic market deepens and becomes more liquid, combined with the stabilization of the government’s fiscal position, finance officials said the government would eventually stop issuing short-term Treasury bills (T-bills) and confine its borrowing to longer-maturity instruments. Following the success of its bond-swap last week and over P66.1 billion worth of debt papers in various maturities were exchanged for the new three-year benchmark bonds issued by the Bureau of Treasury (BTr). The outcome was more than double the original offer of P30 billion. National Treasurer Omar Cruz said the long-term plan was to eventually phase-out short-term instruments when the market reaches the level of sophistication comparable to other developed markets. "When we have enough liquidity and depth, we can phase them out," Cruz said. "Then we can say our market has truly arrived." This year, the BTr has programmed the government’s domestic borrowing to generate at least P75 billion from the domestic debt market in the first quarter of 2006, about 47 percent lower than the P142 billion that it borrowed from domestic creditors in the same quarter last year. Cruz expressed optimism that the market response to the bond-swap indicated that the market was very liquid and would soon attract foreign investors to government issues. Cruz said the bond swap was a success and generated a huge demand for the new benchmark bonds which carry a coupon of 8.5 percent. The turn-out made the issue the single largest issue the domestic market, said Cruz who expressed satisfaction at the market’s response to the swap. Cruz said the transaction would result in the creation of the new 8.50 percent February 2009 Benchmark Bond of P70.9 billion. "The size of this benchmark, which is equivalent to over $1.37 billion, makes it the largest single issue in the Philippine domestic market by a factor of 60 percent," Cruz said. The swap offer for new treasury bonds was intended by the BTr to create market liquidity, Cruz said. He added that it would also lengthen the average maturity of domestic debt by one year to 5.7 years and ultimately attract more foreign investors. The BTr had offered to exchange existing five- and seven-year treasury bonds over the next two weeks, with the results of the offer to be announced on Feb. 28. The three-year bond attracted bids of about P77.6 billion from 36 government securities dealers in 1,000 separate offers, Cruz said. The minimum offer was originally set at P30 billion of the three-year bonds. "The swap gave local and foreign investors a government bond that would be considered liquid by international standards," Finance Secretary Margarito Teves. "We are extremely pleased with the success of the 3-Year Bond Exchange." "We are confident that we will now see increased foreign participation in the domestic bond market and that we are positioned to reduce our dependence on foreign currency-denominated borrowings," Cruz said. The BTr said the final clearing yields for 49 various bonds swapped for the three-year bond were equal to the maximum clearing yields it set on Feb. 6, except for three issues whose clearing yields were slightly lower than the maximum. |
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