By Clarissa Batino
The Philippines plans a peso-denominated debt exchange to trim the number of its outstanding securities while seeking to let banks engage in bond repurchases to help reinvigorate the market, Treasurer Roberto Tan said.
“The country’s strong economic and fiscal fundamentals must be reflected in the secondary debt market, but the volumes have become volatile,” Tan said in an interview Saturday Mactan Island, Cebu. “We need to address this, push for initiatives to boost trading volumes and improve the yield curve.”
The Treasury may offer two tenors of new securities with a size of at least P50 billion ($1.1 billion) each in exchange for securities that are illiquid, infrequently traded, expensive and worth retiring, Tan said. The target is to reduce the count of debt securities to below 100 by the end of the year, the treasurer said in his speech before the Fund Managers Association of the Philippines on March 13.
The average daily trading volume in the Philippine peso bond market fell to a three-year low in 2014, and returns in the past three months on sovereign peso debt are the least in Southeast Asia. A healthy domestic debt market is crucial to a government that’s been relying less on overseas borrowing and to fund the nation’s companies investing in records amounts, Tan said.
The ratio of domestic borrowing to total debt may increase to 88 percent next year and to 89 percent in 2017 from a planned 86 percent this year, according to presentation materials e-mailed by Tan. Gross borrowing is projected to rise to P760.3 billion in 2016 before easing to P688.08 billion, based on a medium-term plan in Tan’s presentation.
The average daily bond trading value fell to 18.2 billion pesos last year after rising above P20 billion in 2012 and 2013, according to data compiled by Bloomberg. While volumes recovered in January, they were back to low levels again since February, Tan said.