Government to return to European debt market

MANILA, Philippines — The government has signaled its intention to return to the European debt market, as it seeks to take advantage of lower rates and the expected demand from European investors, according to the Bureau of the Treasury (BTr).

In an interview, National Treasurer Rosalia De Leon said the Treasury has issued an investor call for its planned euro-denominated bond issuance this year.  

“We started the investors call today. We still have to see the market conditions,” De Leon told reporters.

De Leon said the bonds have proposed maturities of three years and nine-years, with the volume initially set at benchmark 500 million euros.

“It’s indicated, benchmark. We still have to get indications of interest of investors after the calls,” she said.

De Leon said four banks, namely Standard Chartered,UBS, Citibank and Credit Suisse have been mandated for the issuance.

According to the BTr chief, the government decided to return to the euro bond market early this year to take advantage of the low rates.

“You have to look at some strategy and assess market conditions and take advantage of the negative yields also on the Euro area right now,” De Leon said.

Furthermore, she said the government wants to capture spillovers from the robust demand seen during the Philippines’ previous euro bond offering last year.

 “We’ve been opening markets every year in the dollar (bond market), but this time we would want to approach European investors coming from a very strong order book last year. There are still spillovers from there that we’re not able to accept. So we’re coming back for this issue,” she said.

The Philippines last tapped the European debt market in May last year, raising 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.

Meanwhile, De Leon said dollar-denominated securities are still part of the government’s menu for offshore bond issuances this year. Usually, the BTr launches its dollar-bond issuance at the start of every year.

“We still have to see or gauge market conditions. We’re also coming from very successful dollar issuances from our corporates. You’ve seen the likes of SM, San Miguel, and most recently, Jollibee so I think there’s really a very strong investor appetite for Filipino credit, particularly for the corporates,” she said.

Credit watcher S&P Global Ratings has assigned the bonds a “BBB+” long-term foreign currency issue rating.