Govt sells $1.5b worth of 10-year global bonds

The Philippines successfully returned to the international capital market where it sold $1.5 billion worth of 10-year global bonds amid strong demand, the Treasury said Tuesday.

Finance Secretary Carlos Dominguez III said the transaction “further illustrates deepening investor confidence in the Philippines’ growth story and the Duterte administration’s ability to maintain fiscal discipline while spending big on infrastructure modernization, human capital development and social protection for the poor.”

Proceeds of the issuance will be for the government’s general purposes, including budgetary support.

National Treasurer Rosalia de Leon said the issuance garnered strong support from the global fixed income investor community despite recently heightened volatilities in the global markets. 

“This demonstrates strong conviction from the global investor community on the Republic’s economic fundamentals as well as the depth of the Republic’s investor outreach,” she said.

The newly-issued global bonds were priced at US Treasury spreads of T+110 bps [basis points] after an initial pricing guidance of T+130 bps. The notes will settle on Jan. 14, 2019.

It received investment grade scores from debt watchers Moody’s Investors Service, Fitch Ratings and S&P Global Ratings.

The Treasury said the Philippines’ global bond issue was the first among emerging markets in 2019 and “demonstrates the Republic’s ability to respond tactically to conducive market conditions to capture a favorable issuance window.”

It said that by geographical allocation, 37 percent of the bonds were allocated to Asia, 28 percent to the US and 35 percent to Europe. 

The agency said that in terms of investor type, 52 percent went to asset managers, 22 percent went to banks, 14 percent went to sovereign wealth funds, pension funds and insurance and the remaining 12 percent to private banks and other types of investors. 

Bank of China, J.P. Morgan and Standard Chartered Bank acted as joint global coordinators for the transaction, while Citigroup, Credit Suisse, Goldman Sachs (Asia) Llc and UBS acted as joint bookrunners.

Moody’s said its rating for the bond issue mirrored the Philippine government’s issuer rating of “Baa2” or investment grade with a stable outlook.

“The Philippines’ Baa2 issuer rating is characterized by strong economic performance, a strengthening fiscal position and limited vulnerability to external shocks. These are balanced against per capita income and  debt affordability, both of which, although improving, are structurally  weaker as compared to similarly rated peers,” Moody’s said in a report.

“The Philippines’ relatively large economy and high growth potential  supports its capacity to absorb shocks. The country’s favorable demographics support steadily rising labor inputs and potential growth, 

while keeping the burden of aging-related costs on government finances low,” it said.

Fitch assigned “BBB” or investment grade to the bond issue, “in line with the Philippines’ long-term foreign currency issuer default rating of ‘BBB’ with a stable outlook.”

“The rating would be sensitive to any changes in the Philippines’ long-term foreign currency issuer default rating,” Fitch said.

S&P Global Rating also assigned an investment grade or “BBB” to the benchmark-size senior unsecured notes.

“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,” S&P said in statement.