Bureaucracy kills Philippine local bond liquidity

The Philippine finance bureaucrats invented a perfect solution but applied it to the wrong problem.
February 22, 2001
Well-intentioned but impracticable – that’s how to best describe the Philippine government’s attempt to create a secondary trading market for small-denominated bonds.

With much fanfare last month, the country’s Bureau of Treasury (BTr) listed so-called Small-denominated Treasury (SDT) bonds on the Philippine Stock Exchange (PSE) totaling Ps30 billion ($626 million). The SDTs come in denominations of only Ps5000 ($104), with a 13.625% coupon that is intended as a means of siphoning off excess cash from small investors.

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