Philippines launches 2nd global bond offering

MANILA, Philippines — The government has launched its second dollar global bond sale this year as it aims to raise more funds to address the economic impact of the coronavirus pandemic.

The issuance, which has a dual tenor of 10.5 years and 25 years, comes on the heels of the country’s dollar bond offering in April which raised $2.35 billion.

Moody’s Investors Service has assigned a senior unsecured rating of Baa2 to the proposed issuance. It has also assigned a provisional (P)Baa2 foreign currency senior unsecured shelf rating to the government’s shelf program that was recently registered with the Securities and Exchange Commission (SEC) in the US.

“According to the terms and conditions available to Moody’s, the bonds to be issued under the government’s new shelf program will constitute direct, unconditional and unsubordinated obligations of the government of the Philippines,” Moody’s said.

“The proceeds from the bonds are intended for general purposes, including budgetary support,” it said.

S&P Global Ratings also signed the issuance with a BBB+ long-term foreign current rating, while Fitch Ratings gave it a BBB rating.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the global bond issuance would help raise more funds for the various COVID-19 response measures of the government in an “expedient manner” compared to other sources of funding.

He said this could also help lower the government’s borrowing costs and prevent crowding out effects in the local credit market.

Meanwhile, the Bureau of the Treasury (BTr) made a  full award  of the  P30 billion  reissued Treasury bonds at an average rate of 2.169 percent.

This was 5.5 basis points lower than the 2.224 percent recorded in the previous three-year bond auction  on Nov. 4.

Asked why rates declined, National Treasurer Rosalia de Leon said “demand for the belly of the curve remains strong.”

The offering was more than two times oversubscribed, with total tenders amounting to P68.516 billion.

The Philippines is programmed to borrow P3 trillion this year to plug the deficit in its budget, which is expected to widen to 9.6 percent of  gross domestic product (GDP) due to weak revenue generation and higher spending requirements amid the  pandemic.

Earlier this year, the Philippines issued $2.35 billion worth of global bonds, priced at the lowest coupon rate ever achieved by the country for the dollar issuances.

A total of $1 billion for this amount came in the form of 10-year global bonds, priced at a coupon rate of 2.457 percent. This was 40 basis points tighter than the initial price guidance for the securities, which was 220 basis points above benchmark.

The remaining $1.35 billion was raised from the sale of 25-year global bonds, priced at 2.95 percent, which was 42.5 basis points tighter than the initial pricing guidance of 3.375 percent.