Best time for OFW-directed RTBs

Best time for OFW-directed RTBs

BSP OFFICIALS CITE LOW INTEREST RATES, SHARP INVESTOR SENTIMENT, BUT CRUZ CAUTIOUS

 

By Jun Vallecera

Reporter

CENTRAL bank officials believe that now or anytime soon is the opportune time to come out with a new retail treasury bond sale program for overseas Filipino workers, when interest rates are low and investor sentiment still sharp.

A senior monetary official said Treasury chief Omar Cruz’s ambivalence on it at present may sharpen appetite for the IOUs last issued in 2004. But the opportunity could pass soon and the national coffers would end up none the richer for it.

“It’s a pity. Now is the best time to do it when interest rates are better than borrowing overseas,” an official, requesting anonymity, said.

According to the official, while Cruz is correct in gauging the depth of the appetite first and on addressing among others tax and registry issues, the opportunity cannot last forever.

The planned RTBs are to be sold exclusively to OFWs and their families and the proceeds spent on infrastructure projects planned between now and 2010.

The matter of denominating the IOUs in local currency, in US dollars or in the European Union’s euro has not yet been determined.

An earlier report said the final choice will depend on where the greatest amount of interest will be, given that OFW concentrations can be found almost anywhere in the world.

According to the Department of Finance, the first RTBs were issued in 2001 and then again in 2002, and these together sold for a total P100 billion.

Later in 2002, three- and five-year RTBs were sold at a cost of 10.75 percent paid every quarter raising another P63 billion.

The last one was a five-year IOU issued in 2004 that cost the government significantly more at 7.28 percent versus only 5.875 percent some three years earlier.

Interest rates at present are still moving down, making the timing of the issuance of yet another batch of RBTs all the more important, according to officials.

Changes in the mode of paying RTB investors have also been adopted to pave the way for semiannual rather than quarterly payments, they added.

According to officials, OFWs are a potent force who’re able to send $12 billion worth of overseas earnings a year, or the equivalent of some 10 percent of total output of the gross national product.

Although less than 40 percent of OFW families actually save a part of their earnings in the form of bank deposit accounts, the number that do invest in more sophisticated financial instruments are much smaller. Still, some officials believe their ranks are swelling.

Deputy Bangko Sentral governor Diwa Guinigundo said the financial sophistication of OFWs has increased significantly over the past few years and the next hurdle was to get them to invest and to borrow in still higher numbers to take advantage of the multiplier effect.

http://www.businessmirror.com.ph/01292007/headlines01.html