Bond market gets boost from gov't
Balita News
MANILA, July 9 (PNA) - - The Philippine bond market is getting a
big boost from the national government with the recent accreditation
of five underwriters which would issue a P10 billion worth of initial
public offering (IPC) of its small-denominated Treasury Bonds with a
maturity of five years and one day on July 28, 1999.
Government officials said that the public offering is expected to
lend support to the existing government infrastructures and those
still in the pipeline.
Besides, it will lead the way for the final creation of the
secondary bond market in the country, says National Treasurer Leonor
Briones of the Bureau of the Treasury (BTr) in a recent press
briefing.
The government's move was in response to the call from concerned
economist to support the establishment of the secondary bond market
proposed by the United Nations Commission for Trade and Development
(UNCTAD) in order to strengthen its market.
They noticed that the Philippine bond marekt is experiencing
illiquidity due to limited distribution system and the price setting
is inefficient having no bid and offer system.
This is aggravated by the long-term maturity of debt instruments
plus the short-term bias of the market.
Mr. Romeo Bernardo, vice chairman of the Foundation for Economic
Freedom, reasoned out that the absence of liquidity forced investors
to hold on to their bonds until they reach maturity.
He explained that the issuance of bonds becomes very costly due to
the absence of the market infrastructure thus making the secondary
bond market impossible to create.
But this problem will be solved once the proposed listing of
multi-billion government securities at the Philippine Stock Exchange
becomes effective.
In preparation to this, the government and the PSE are currently
working out the possibility to install a separate electronic board
using the computer system of the PSE.
Recently, the BTr also expressed interest to link up its Registry
of Scripless Securities (RoSS) with that of the PSE Maktrade System.
As a common practice, debt securities, including government
securities, are held by banks on and off books. "Best of these
financial institutions do have a small portfolio of securities but
they finance it with overnight money from he banks of one week money
At present, the local securities dealers have enough reason to get
envious against international securities dealers because the market
lacks a system where repurchase and reverse repurchase agreements can
be used of finance the inventory of debt instruments.
Based on a Bangko Sentral's regulation, repurchase agreements and
the reverse repurchase agreements are subject to reserve
requirements. Because of this,securities dealers shy away from using
these debt instruments to finance their inventories as it will only
increase transaction cost,the study added. PNA) jv/JE/RGA/ aav
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