THE Philippine government is tapping the dollar bond market anew to raise additional funds for budgetary support as the economy continues to grapple with the impact of the pandemic, coupled with the recent onslaught of typhoons.
The Bureau of the Treasury (BTr) is set to sell benchmark-sized 10.5-year and 25-year dollar-denominated senior unsecured fixed rate notes.
The bonds, which have a settlement date of December 10, are set to mature on June 10, 2031 and December 10, 2045.
S&P Global Ratings assigned a “BBB+” long-term foreign currency rating on the offering. Moody’s Investors Service gave a “Baa2” rating, which mirrors the Philippines’s issuer rating. Fitch Ratings, meanwhile, rated the issuance with “BBB,” which is in line with the country’s long-term foreign currency issuer default rating.
“The notes represent direct, general, unconditional, unsecured, and unsubordinated obligations of the sovereign, and rank equally with the Philippines’s other unsecured and unsubordinated debt obligations,” S&P said in a statement on Wednesday.
With the offering, ING Bank Manila Economist Nicholas Antonio T. Mapa and RCBC Chief Economist Michael L. Ricafort said the Philippines is continuing to build up its war chest to fight the pandemic.
Apart from the Covid-19 response, Ricafort said the proceeds can also be allocated to other government spending, such as infrastructure, to boost the economy.
“The new bonds should be well-received by the market with Philippine authorities looking to secure funding at very attractive rates,” Mapa said.
However, Mapa said the “bigger question for the government . . . will not be their ability to raise funding both globally and domestically, but rather their willingness to part with their loan proceeds and move to accelerate spending to support the economy floundering in recession.”
In October, government spending slipped by 6.84 percent to P289.6 billion from P310.8 billion in the same month last year.
The ING economist added that the projected inflow of dollar borrowings will bode well for the peso in the near term. According to data from the Bankers Association of the Philippines, the local currency ended flat at P48.05 on Wednesday.
Third offering
The dollar bond transaction is the third time that the Philippines launched a global bond offering this year.
In January, the government’s first offering raked in at least €1.2 billion as it returned to the euro debt market. The issuance consisted of three-year and nine-year euro-denominated securities.
BTr raised additional $2.35 billion in April after issuing 10-year and 25-year dollar-denominated global bonds. Majority or $1.35 billion of the total proceeds came from the 25-year issuance.
The government raised $1.5 billion from dollar-denominated bonds and sold €750 million worth of euro bonds last year.
Meanwhile, BTr announced in October that it has already shelved plans to issue renminbi-denominated Panda bonds and yen-denominated Samurai bonds this year.
This, after the Bangko Sentral ng Pilipinas approved the P540-million advance credit to temper the government’s budget deficit.
The government, to recall, raised 2.5 billion renminbi or P19 billion from its second Panda bond issuance and ¥92 billion or P44.3 billion from its Samurai bond sale in 2019.
In the local debt market, the national government is set to borrow P120 billion this month, which was lower compared to P140 billion it programmed in November. The borrowing comprises P60-billion Treasury bills and P60-billion Treasury bonds.
Image credits: Walter Eric Sy | Dreamstime.com