The national government is exploring the possibility of issuing “prize bonds” similar to the ones issued in Pakistan to encourage more savings, according to the Bureau of the Treasury (BTr).
On Tuesday, National Treasurer Rosalia V. de Leon told reporters that the government is developing “innovative structures” to increase savings.
“Looking at some possible structures like what others have also been doing, for instance, Pakistan, they have a prize bond. So, on top of the usual coupon that you get, there’s also an opportunity for you to win in a drawing,” de Leon said.
“But that’s something that we still need to explore further. [We have to] evaluate in terms of the requirements like infrastructure and also even in terms of the legal issues that may come up,” she added.
Prize bonds in Pakistan, according to Pakistan’s National Savings, have different denominations that are drawn periodically.
The bonds have denominations of as small as 1,000 rupees to as high as 700,000 rupees. Last week, Pakistan’s National Savings reported that there was 1 winner of the 700,000 rupees prize bond, three winners of the 200,000 rupees prize bond and 1,199 winners of the 1,000 rupees prize bond.
Based on the text of the 1,500 rupees prize bond, the holder of the bond is entitled to receive 1,500 rupees free of interest “and, in addition, such prizes may be won on this bond in accordance with the rules framed by the Government of Pakistan.”
Apart from Pakistan, prize bonds are also being used in the United Kingdom and New Zealand. In the UK, these bonds are called “Premium bonds” while in New Zealand they are called “Bonus bonds.”
“[We are still] exploring this right now. In order that, aside from the RTB, we will be able to encourage more savings,” de Leon said.
Treasury bonds
ON Tuesday, the BTr has awarded the full P20 billion on offer for reissued three-year Treasury bonds (T-bonds) during its auction on Tuesday.
The BTr’s auction committee said the three-year T-bonds fetched an average rate of 3.961 percent, lower than previous auction and prevailing secondary market rate. The issue attracted tenders of P56.6 billion, thrice oversubscribed.
De Leon said the results were expected given the pronouncements of the United States Federal Reserve “will be acting appropriately given the slowdown in the global economy.”
Further, she said, the recent announcement by the Bangko Sentral ng Pilipinas (BSP) of further interest rate cuts in September increased the interest for the issuance.
“We also see that the Fed will be acting appropriately given the slowdown in the global economy, and also on the onshore, we see that the Central Bank also released their inflation forecast for August and, again, we expect the outlook, looking at benign inflation even for the year, below 3 percent,” de Leon said.
Recently, BSP Governor Benjamin Diokno announced the MB’s decision to cut the interest rate on the BSP’s overnight reverse repurchase facility by 25 basis points to 4.25 percent.
The interest rates on the overnight deposit and lending facilities were slashed to 3.75 percent and 4.75 percent, respectively, on the back of the inflation downtrend, as well as the tepid GDP growth in the April-to-June period this year. This the second cut in key interest rates made by the BSP for this year.