Philippines eyes panda bonds issuance within April 2019

MANILA, Philippines — The Philippines is looking at returning to the offshore debt market within the month through the issuance of renminbi-denominated bonds to raise $500 million.

This developed as the yield of the reissued 10-year treasury bonds eased by 24.2 basis points to 5.954 percent from 6.196 percent last month due to strong demand from investors.

National Deputy Treasurer Erwin Sta. Ana said authorities are now finalizing documentation for the planned fund raising activity.

Although nothing is final yet, Sta. Ana said the Bureau of the Treasury (BTr) is looking at tapping the Chinese debt market anew after the Holy Week.

“Once we sort out the regulatory items, we can just look at the market, most likely after the Holy Week. Likely after the Holy Week, unless there are changes in the market,” he said.

Sta. Ana said the Philippines is still awaiting the green light from the National Association of Financial Market Institutional Investors (NAFMII) in China as well as local regulators as well as an opinion from the Department of Justice (DOJ).

“We have to get some internal approval and actually opinion from the DOJ. We have to secure a go ahead from NAFMII from China. We’re still waiting for that at this stage. But once those are sorted out, we can go ahead,” he said.

Sta. Ana said finance authorities are looking at tenors of three or five years with the improving inflation environment in the country.

The Philippines successfully raised $230 million or about 1.46 billion renminbi during its maiden issuance of three-year panda bonds in March last year.

The country is also looking at another samurai bond float of up to $1.5 billion in the third quarter.

It successfully raised $1.5 billion from the issuance of dollar denominated global bonds in January.

The national government borrows from both local and foreign creditors to finance its budget deficit, which is capped at 3.2 percent of the gross domestic product (GDP) this year.

For 2019, the government is expected to borrow P1.19 trillion, 20 percent higher than the 2018 program of P986 billion, due to higher fiscal deficit ceiling.

Of the amount, 25 percent or P297.2 billion is projected to come from foreign lenders, while 75 percent or P891.7 billion will come from domestic creditors.

Meanwhile, investors yesterday swarmed the auction of reissued 10-year T-bonds with bids reaching P46.5 billion or more than double the issue size of P20 billion amid easing inflation

“It just shows market preference on the longer tenors. This is primarily driven by of course the inflation print last month and I think the view moving forward,” Sta. Ana said.