Demand for the Philippine government's upcoming retail treasury bond offer is strong and will not only exceed the planned offering size of P25 billion but possibly top the record P114 billion raised last year through a similar offering, arrangers of the planned deal said Wednesday.

"That can easily be exceeded," said Roberto Juanchito Dispo, executive vice president at First Metro Investment, one of eight banks arranging the bond sale, "Give us the mandate and we will deliver." Dispo spoke at the signing ceremonies for the bond deal.

The government will offer P10 billion each for retail treasury bonds maturing in five and seven years, and another P5 billion for 10-year paper. The yield on the bonds, which will be offered at face value, will be set at an auction scheduled on Aug. 10. A public offering is scheduled between Aug. 10 and Aug. 17, while issuance is set on Aug. 19.

Asked about the arrangers' offer to raise a record amount via the retail bond, National Treasurer Roberto Tan told reporters during the signing ceremonies: "We're not looking at generating that much volume....But we will be opportunistic."

Some economists are predicting that the Bangko Sentral ng Pilipinas will start "normalizing" interest rates that were lowered to cushion the economy against the global financial crisis, likely starting with a 25-basis point increase in the fourth quarter.

Around P65 billion of retail treasury bonds are maturing between August and September. Part of the new issuance will refinance the maturing obligation.

Eduardo Francisco, president of BDO Capital and Investments Corp., another arranger for the retail bond, said that demand for the new offering is strong, especially with the excess liquidity in the financial system.

At a Tuesday auction of bonds due March 2020, investors put in tenders totaling P18.42 billion, twice the offer amount of P8.5 billion despite the upcoming retail bond. The bond, originally issued as a 10-year paper with a coupon of 7.750%, will be reissued at a yield of 7.368%.

Dispo said the result of Tuesday's auction could provide a benchmark for the upcoming maiden 10-year retail bond offering.

Finance Secretary Cesar V. Purisima said the government will be opportunistic on its planned issuance of the first peso-denominated borrowing abroad that may come before the end of the year and the size would depend on market conditions.

Currently, Purisima said the government is preparing to seek approval from the Bangko Sentral ng Pilipinas on the planned sale of dollar- denominated debt in exchange for older, shorter-dated securities.

The finance department intends to lengthen the debt maturities of the government's debt papers, reduce foreign-currency risks and cut bunching.

Purisima said proceeds from the government's first ever international peso debt papers sale will be used to finance the programmed record budget shortfall of P325 billion this year.

Aside from the peso bonds, he also said the government may borrow in behalf of other agencies like Power Sector Assets and Liabilities Management Corporation to cut borrowing costs.

The Development Budget Coordination Committee (DBCC) earlier recommended to raise the country's borrowings this year by 8 percent to finance a record budget deficit.

The government may increase by P57.8 billion the original borrowing program of P708.6 billion for this year from the domestic and foreign debt markets to P766.4 billion.