The Bond Markets of Developing East Asia by Robert F Emery

Author:Robert F Emery [Emery, Robert F]
Language: eng
Format: epub
Tags: Social Science, Political Science, World, Asian, Regional Studies
ISBN: 9780429965340
Google: Ef_EDwAAQBAJ
Publisher: Routledge
Published: 2018-02-23T06:46:02+00:00

National Government Issues

Excluding from this first category the treasury bills which constitute about 63 percent of the total, the major remaining items are treasury notes and bonds. About three-fourths of the treasury notes are floating rate treasury notes, which the government began to issue in much larger amounts in 1991. Treasury bonds account for the remaining 10 percent, and a single, 20-year, P. 50 billion treasury bond21 comprises about 82 percent of the total treasury bonds outstanding. This P. 50 billion bond was issued by the national government and purchased by the central bank as part of the July 1993 reorganization arrangements for the central bank. The central bank will reportedly use the bond in connection with its open market operations.

The remaining items in this category of national government issues comprise a diverse mixture of bonds that account for less than one-half of one percent of the outstanding national government issues. Examples of these issues would be the 2 percent Capital Treasury Bonds (Presidential Decree No. 694), the 4 percent Treasury Capital Bonds, and the 7 percent National Power Corporation Bonds. Most treasury bonds are issued as nonmarketable securities to government institutions and corporations.

The government has been issuing treasury notes on an intermittent basis since at least the 1980s, but in recent years it has made a determined effort to issue two-year and three-year notes on both a fixed-rate and floating-rate basis. Since September 1994 it has issued fixed- and floating-rate treasury notes on an alternating monthly basis. These actions are aimed at moving the domestic debt maturity structure, which has been predominantly in short-term treasury bills, into a long-term maturity structure. This should help in providing a medium-term yield curve that could be used for pricing private LTCP and in easing the pressure on the government to be constantly servicing its short-term obligations.

One of the earlier moves to step up the issue of treasury notes in the past decade occurred in February 1988 when the central bank auctioned two blocks of three-year, 12 percent treasury notes in an amount of P. 5.6 billion. But the auction of fixed-rate treasury notes was discontinued in 1989 because of unfavorable market conditions. In mid-1991 the central bank began to auction three-year floating-rate treasury notes indexed to the 91-day treasury bill with the rate changed quarterly. The central bank chose the floating-rate approach as it was not sure how well a fixed-rate note would be received. The notes carried rates based on the weighted average rate of the 91-day treasury bill competitive average resulting from the two auctions immediately preceding the rate setting date. The rate to the buyer on the first block of 16 tranches was the base rate plus a spread of three-fourths percentage point, while on the second block of 11 tranches the spread was one-half percentage point. In November 1994 the central bank began to offer the third block of floating-rate treasury notes. One month earlier the central bank held the first auction of fixed-rate notes since 1989. The two-year, 3 billion peso fixed-rate treasury notes were fully subscribed.

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