Fitch upgrade bodes well for Philippine bond sale

MANILA, Philippines — Fitch Ratings’ recent decision to upgrade the country’s long-term foreign currency issuer rating to “BBB” bodes well for the government’s planned global bond offering early next year, the Bureau of the Treasury (BTr) said.

National Treasurer Rosalia De Leon said the upgrade came months before the government’s scheduled $1 billion global bond sale.

“We welcome this latest favorable action from Fitch, which is a resounding testament to the country’s sustained strong economic fundamentals and favorable growth trajectory. This augurs well for our next global bond offering even as the market has priced our bonds much tighter than our ratings,” De Leon said.

According to Finance Undersecretary Gil Beltran, the upgrade reflects the stronger public sector finance outlook for the Philippines, which was brought about by improved tax administration, the expected passage of the tax reform bill, and the prudent monetary policy.

“Also, we have unveiled a Build Build Build infrastructure program, sectoral reforms and a list of ease of doing business programs that will enhance the competitiveness of domestic industries and boost GDP growth to seven to eight percent in the medium term,” Beltran said.

Debt watcher Fitch Ratings last Monday announced it has upgraded the Philippines’ sovereign credit rating to “BBB” from the minimum investment grade of “BBB-” due to sustained macroeconomic fundamentals and strong investor confidence in the country.

It was the first of such upgrade for the Philippines from Fitch since March and the first since President Duterte assumed office. Its rating for the Philippines is now at par with those of S&P Global Ratings and Moody’s Investor Service.

Credit ratings are a measure of a country’s willingness and ability to pay debts as they fall due. The new rating is assigned a “stable” outlook, which means there are no pressing factors that could trigger an adjustment within the near term.

Earlier, Finance Secretary Carlos Dominguez said international banking institutions, including European banks, have expressed interest in the government’s planned dollar-denominated global bond float early next year.

Deputy Treasurer Erwin Sta. Ana also said both banks and potential investors have been providing positive feedback on the planned bond issuance.

He said the government is securing the necessary approvals for the issuance, including the go-signal of the US Securities and Exchange Commission.

However, Sta. Ana said the BTr will remain closely monitoring developments in the market, particularly in the US bond market.

The official also assured the government would be maintaining its 80:20 borrowing mix, in favor of domestic lenders. In 2018, the government is planning to borrow P888.227 billion, with 20 percent or P176.269 billion of the amount sourced from foreign markets.