Government Securities

The Philippine Government issues two kinds of government securities (GS): Treasury Bills and
Treasury Bonds, so-called because it is the Bureau of the Treasury which originates their sale to the
investing public through a network of licensed dealers. Government agencies, Local Governments and
government-owned or controlled corporations may float securities but these are not labeled as
Treasuries. Government securities are no longer certificated, they are known as "scripless", just like in
USA, Canada, China and Korea. GS discount or coupons are subject to twenty percent final income tax
which is withheld upon floatation of Treasury Bills or upon payment of the coupon for Treasury Bonds.
No other tax is imposed on the secondary market buyer.

Treasury Bills

Treasury Bills are government securities which mature in less than a year. There are three tenors of
Treasury Bills: (1) 91 day (2) 182-day (3) 364-day Bills. The number of days are based on the universal
practice around the world of ensuring that the bills mature on a business day. Treasury Bills are quoted
either by their yield rate, which is the discount, or by their price based on 100 points per unit. Treasury
Bills which mature in less than 91-days are called Cash Management Bills (e.g. 35-day, 42-day).

Treasury Bonds

Treasury Bonds are government securities which mature beyond one year. At present there are five
maturities of bonds (1) 2- year (2) 5 year (3) 7 year 4) 10 year and (5) 20-year. These are sold at
its face value on origination. The yield is represented by the coupons, expressed as a percentage of the
face value on per annum basis, payable semi-annually

Securities Dealer

Securities Dealer is a financial institution organized usually as a corporation or a partnership, whose

principal business is to buy and sell securities, whether registered or exempt from registration, for the
dealers own account or for the account of client/s. A securities dealer before dealing in securities is
required to obtain a license from SEC pursuant to the Revised Securities Act.

Government Securities Eligible Dealer (GSED)

Government Securities Eligible Dealer (GSED) is a SEC-licensed securities dealer belonging to a

service industry supervised/regulated by Government (SEC, Bangko Sentral ng Pilipinas or Insurance
Commission) which has met the (a) P100 M unimpaired capital and surplus account; (b) the statutory
ratios prescribed for the industry, and (c) has the infrastructure for an electronic interface with the
Automated Debt Auction Processing System (ADAPS) and the official Registry of Scripless Securities
(RoSS) both of the Bureau of the Treasury (BTr) using Bridge Information Systems (BIS), and
acknowledged by the BTr as eligible to participate in the primary auction of government securities. A
List of GSEDs are included in this Primer for ease of investors who wish to buy government securities.

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 KAWANIHAN NG INGATANG-YAMAN
(BUREAU OF THE TREASURY)
INTRAMUROS, MAYNILA
LIST OF GOVERNMENT SECURITIES ELIGIBLE DEALERS (GSEDs)
(as of April 05, 2014)

BANKS
1 Asia United Bank 33 AB Capital and Investment Corp
2 Asiatrust Development Bank 34 BPI Capital Corporation
3 Australia & New Zealand Banking Group Ltd. 35 First Metro Investment Corporation
4 Banco de Oro Unibank, Inc.
5 Bank of Commerce C. Non-Banks(without Quasi-Banking Licence)
6 Bank of the Philippine Islands
7 BDO Private Bank 36 BDO Capital and Investment Corporation
8 China Banking Corporation 37 VICSAL Investment, Inc.
9 CTBC Bank (Phils) Corp. (formerly Chinatrust (Phils))
10 Citibank, N.A.
11 Citistate Savings, Inc.
12 Deutsche Bank
13 Development Bank of the Philippines
14 East West Banking Corporation
15 Hongkong and Shanghai Banking Corp.,Ltd.
16 ING Bank
17 JP Morgan Chase Bank, National Association
18 Land Bank of the Philippines
19 Maybank Philippines, Inc.
20 Metropolitan Bank and Trust Company
21 Philippine Bank of Communications
22 Philippine Business Bank
23 Philippine National Bank
24 Philippine Veterans Bank
25 Planters Development Bank
26 Rizal Commercial Banking Corp.
27 Robinsons Bank Corporation
28 Security Bank Corp.
29 Standard Chartered Bank
30 Sterling Bank of Asia, Inc.
31 Union Bank of the Philippines
32 United Coconut Planters Bank
B. Non-Banks(with Quasi-Banking License )
33 AB Capital and Investment Corp
34 BPI Capital Corporation
35 First Metro Investment Corporation
C. Non-Banks(without Quasi-Banking Licence)
36 BDO Capital and Investment Corporation
37 VICSAL Investment, Inc
Automated Debt Auction Processing System (ADAPS)

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Automated Debt Auction Processing System (ADAPS) is an electronic mode by which the National
Government sells government securities to a network of GSEDs which are linked to the BTr through
BIS every Monday for Treasury Bills and every second and fourth Tuesday for Treasury Bonds,
whereby GSEDs tender their bids (both competitive and non-competitive) by keying-in the amount
(minimum of P10.0 M) and yield of their choice (for a maximum of seven (7) competitive bids and one
(1) non-competitive bid per tenor for any amount above P10.0 M) using a BIS terminal in the GSED
office. Within seconds the bids are arrayed by the System in the terminals of the BTr. After the cut-off
time of 1:00 P.M. the array is viewed by the Auction Committee which then decides on the award. The
award is keyed-back to the respective terminal of GSEDs.

Two days after the auction, the government securities are credited to the Securities Principal Account of
the GSED in the Registry of Scripless Securities (RoSS) and the Demand Deposit Account of the
GSED at Bangko Sentral ng Pilipinas is debited in favor of the Treasurer of the Philippines for the cost
of the government securities awarded to the GSED concerned. This completes the trade in the primary
market (from the issuer the National Government to the licensed dealers or GSEDs). This is also known
as origination of GS.

Over-the-Counter (OTC)

Over-the-Counter (OTC) ) is another mode of originating GS for specific investors, namely, the
Government Owned or Controlled Corporations (GOCC), the Local Government Units (LGU) and the
Tax Exempt Institutions (TEI), e.g., pension funds, GSIS, SSS, etc.. It is non-competitive. The Over-the-
Counter is open every day. The applicable yield rates for Treasury Bills issued to GOCCs/LGUs/TEIs
shall be based on the rate of the immediately preceding Treasury Bill auction. For GOCCs, the rate
shall be the lowest accepted yield rate, for LGUs, the weighted average yield rate and for TEIs, the
yield shall be 90% of the weighted average yield rate. Treasury Bonds issued to GOCCs/LGUs/TEIs
shall be priced based on the current market yield. The coupon rate for GOCCs and LGUs shall be
based on the rate corresponding to the auctioned Treasury Bonds. The applicable coupon rate for TEIs
shall be based on thew 90% of the coupon rate.

Registry of Scripless Securities (RoSS)

Registry of Scripless Securities (RoSS) is the official Registry of absolute ownership, legal or beneficial
titles or interest in GS (Treasury Bills and Treasury Bonds). Upon award of GS to a GSEDs at the
auction, the securities award are electronically downloaded to the RoSS system. On issue date the
Principal Securities Account of GSED are credited of the winning bids.

The GS trades are entered by both parties in their respective trading terminals using their confidential
identification and password and to activate the system and authorize every transfer instruction between
9:30 a.m. to 1:30 p.m. The RoSS system checks the securities in the sellers securities account and
earmark these for transfer. The system then sends an electronic settlement file to BSP containing the
amount to be debited and credited to the Regular Demand Deposit Account (RDDA) of the buyer and
seller. Once settlement were processed, the BSP Philippine Payment and Settlement System
(PhilPASS) will send back a file message that settlement were done and the RoSS system will now
transfer the earmark securities from the seller securities account to the buyer securities account.
A posted message will then send back by RoSS to the system provided.
Securities and cash settlement of gs transaction to the secondary market is done via DvP on a Real

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Time Gross trade for trade basis. Cut-off time for peso funding in the Philippine Payment and
Settlement System (PhilPASS) is until 2:00 p.m. All transaction which have been unsettled after the
2:00 p.m. cut-off time will be declared failed transaction and the earmarking on the company securities
at RoSS will be lifted.
Yield
Yield is the increment or interest on an investment in GS. It is the discount earned on Treasury Bills or
the coupon paid to the holder of Treasury Bonds. Both the discount and the coupon are expressed as a
percentage of the value of the GS on a per annum basis. Conventionally, the yield on longer dated GS
are higher than the yields of shorter-dated GS.
Competitive Bid
Competitive Bid is a tender to buy an amount of GS at a yield rate per annum that a GSED believes will
wrest an award for the GSED by out-bidding other GSEDs in the primary market auction of GS

Non-Competitive Bid
Non-Competitive Bid is a tender to buy a specified amount of GS, by a GSED in the primary auction of
GS, without indicating any yield rate, on the understanding that the award shall be at the weighted
average yield rate of the competitive bids awarded at the same auction.
Price Discrimination or English Auction is a method in which successful competitive bidders pay
the price they have bid, and all the winning bidders may pay different prices.
Uniform Price or Dutch Auction
Uniform Price or Dutch Auction is a method of pegging a uniform coupon rate of a Treasury Bond at the
stop-out level of arrayed amounts of bid with the corresponding yield rate tendered. Conventionally, the
rate must be divisible by one-eighth of 1%.
Settlement of Trades
Settlement of Trades is the payment process both in the primary and secondary markets for
government securities traded. Settlement of trades is undertaken by the BSP being authorized by
GSEDs to debit their respective demand deposit accounts with the BSP in favor of the demand deposit
account of the Treasurer of the Philippines or their counterparty GSED also with the BSP or vice versa.
Price of a GS is the value based on 100 points per unit. Treasury Bills are conventionally quoted in
terms of the discount rate, while Treasury Bonds are quoted in terms of the coupon rate or the price. If
a Treasury Bond is quoted in terms of its price, the price is either at a discount, at par, or at a premium
and the coupon is a rate in relation to the maturity date of the bond.
Price of a GS is the value based on 100 points per unit. Treasury Bills are conventionally quoted in
terms of the discount rate, while Treasury Bonds are quoted in terms of the coupon rate or the price. If
a Treasury Bond is quoted in terms of its price, the price is either at a discount, at par, or at a premium
and the coupon is a rate in relation to the maturity date of the bond.

(Source: Phil. Government Bureau of the Treasury official website, July 24, 2016)