Philippines tapping China market with P19-B panda bond offer

MANILA, Philippines — The Philippines plans to return to the Chinese debt market this week with the possible issuance of 2.5 billion renminbi-denominated bonds, according to the Bureau of the Treasury (BTr).

In an interview with reporters, Deputy Treasurer Erwin Sta. Ana said the Treasury is ready to push through with its renminbi-denominated or panda bond issuance this week, but this would still depend on market conditions in the Chinese onshore market.

“We are still watching the markets now, but as the Treasurer Rosalia de Leon has mentioned, we may go ahead this week if there’s an opportunity. We are still looking at the markets at this time. There’s really no pressure for us to launch, but rather we are looking for that sweet spot,” Sta. Ana said.

According to Sta. Ana, among the developments being monitored by the Treasury is the trade war between the US and China, as this could affect the Chinese capital market.

“We are in the middle of retaliatory action between the US and China so we will closely monitor what’s happening as it affects the Chinese inter-bank market. We’ll see how the benchmark moves in the next couple of hours or days,” he said.

Sta. Ana said the proposed issuance would have an initial size of 2.5 billion renminbi (about P19 billion), but declined to specify the tenor.

Earlier, the Treasury said it has acquired the necessary regulatory approvals for the panda bond issuance.

Should this push through this week, it would come a week after the Philippine government’s return to the european bond market.

Sta. Ana said the short difference in the timing between the two fund raising activities would not have any effect on demand and rates for the panda bond issuance.

“We don’t see any adverse effect on the later issuance which is the panda because it’s a totally different market and different set of investors,” he said.

Just last week, the Philippine government successfully raised 750 million euros from the issuance of eight-year global bonds.

The debt papers were priced at a coupon rate of 0.875 percent, 70 basis points over benchmark. This yield is also tighter than the initial pricing guidance of plus 90 to 100 basis point range.

The notes are expected to be settled on May 17.

Meanwhile, Sta. Ana said the government is also preparing for a possible yen-denominated or samurai-bond issuance later this year.

“We are also preparing for it. You know, in all these transactions we have to file all the offering circulars, registration statements. We are in the documentation stage for the yen,” he said.