Deputy Treasurer Eduardo Mendiola said that this will remove the dealer’s intervention and allow the individual investors to directly buy and sell the government securities through a broker.

At the moment, a securities dealer’s intervention is necessary before an individual investor can purchase or sell government debt paper.

A securities dealer is usually a corporation or a partnership established mainly to buy and sell securities.

“Dealers are, in effect, bondholders themselves, and there are instances that the yield for a particular bond is at 2.5 percent or higher but they would only offer a yield of 1.3 percent to individual investors. They would earn more from selling at the expense of the buyer,” Mendiola said. “There are also instances when the interest rate for a particular note is lower, but a dealer, since he is the holder of such paper, could also sell it at a higher rate.”

Mendiola said that there were even times when a dealer deducts up to 500 basis points from the yield.

The move is also in preparation for the government’s offering of retail Treasury bond, scheduled during the fourth quarter of the year.

The said debt paper may be bought by an investor for as low as P5,000 to as high as P20 million.

Qualified investors may soon open their own gross accounts within the month or in October. Mendiola said that the government is already coordinating with the National Association of Securities Broker Salesmen Inc. The group is organized by the Bankers Association of the Philippines.

Mendiola said an individual investor could go directly to a broker who does not own a government bond since it can only derive the income on a commission basis.

“If you are in Tuguegarao or in Davao you still need to go to the dealer to have your bonds sold or if you want to buy one. But once they open their own gross accounts, all transactions to a broker [and not to a dealer] would be a phone call away,” Mendiola said.

“A few people realize that the fixed-income market offers so much liquidity. You see, if you buy a bond, without any regard to the tenor, you can part with it anytime at your gain because it can be traded,” Mendiola said.

He said if the investors decided to hold on to their securities, it can still earn interest upon maturity.