Governement launches dollar bond issuance

MANILA, Philippines — The Bureau of the Treasury (BTr) is starting the year with the launch of the Philippines’ long-term US dollar-denominated bonds issuance on Monday night.

The issuance is part of the P297.2 billion ($5.504 billion) external borrowing program of the Duterte administration for the year 2019.

Traditionally, the Philippines floats dollar denominated bonds every start of the year with a benchmark size of $750 million to $1 billion.

Funds raised through this issuance are used to help finance the country’s budget deficit, which is programmed at 3.2 percent of the gross domestic product (GDP) this year.

Credit watcher S&P Global Ratings assigned a “BBB” long-term foreign currency rating to the Philippines’ dollar bond issuance.

“S&P Global Ratings today assigned its ‘BBB’ long-term foreign currency rating to the proposed benchmark-size US dollar-denominated senior unsecured notes to be issued by the Republic of the Philippines,” the credit rating agency said in a statement released yesterday.

“The notes represent direct, general, unconditional, unsecured, and unsubordinated obligations of the sovereign, and rank equally with the sovereign’s other unsecured and unsubordinated debt obligations,” it said.

Meanwhile, the first domestic issuance of the BTr saw higher yields as investors showed preference for longer-term securities.

This prompted the auction committee to cut accepted bids for 91-day Treasury-bills (T-bills), and fully award the 182-day and 364-day debt papers.

The auction committee capped the accepted rates for 91-day securities, tempering the increase in the average rate to 5.411 percent. This was 8.8 basis points higher than the 5.323 percent fetched by the same securities in its previous auction last Dec. 17, 2018.

The P6 billion offering was undersubscribed, with total tenders reaching P4.344 billion. Of the amount, only 2.72 billion was awarded.

Rates for 182-day T-bills meanwhile averaged 6.424 percent, eight basis points up from the 6.344 percent recorded the previous auction.

Healthy demand met the P6 billion offering, with P9.166 billion in total bids.

Lastly, the 364-day T-bills fetched an average rate of 6.641 percent, 5.6 basis points higher than the previous auction’s level of 6.585 percent.

The P8 billion offering was almost twice oversubscribed with total tenders amounting to P15.849 billion.

“The first auction is so far good. Investors are now going into the longer term, the 182 and 364-day, given the expectations that inflation will continue to trend downwards and also following the remarks of (BSP) Deputy Governor Diwa (Guinigundo) about the easing of inflation in the coming months,” National Treasurer Rosalia De Leon said in an interview after the auction.

And then, of course, there are also some speculations that the Fed (US Federal Reserve) might also pause its monetary tightening given the very guarded remarks of chairman Jerome Powell. They are listening to the markets and patiently watching also the global economy so the Fed might pause. So I think that also lifted the sentiment of the market,” she said.