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Tuesday, December 12, 2023

PH bond sale raises $2.75b on strong investor demand

The government raised $2.75 billion from the international capital market this week with its offering of dual tranche 10.5-year and 25-year global bonds, the Department of Finance said Thursday.

It said in a statement the new 10.5-year global bonds "were priced at US Treasury spreads of T+ 70 basis points (bps) and a coupon of 1.648 percent, after an initial pricing guidance of T+ 100 bps area.”

The 25-year tranche was priced at 2.65 percent, or 35 bps tighter than the initial pricing guidance of 3 percent area.

National Treasurer Rosalia de Leon said the success of the issuance was a testament of the resilience and resolve shown by the government to overcome the sufferings brought about by the pandemic.

"It also manifests the administration’s ability to identify and capture favorable market windows in such uncertain times. Large portion of this success can be attributed to reforms intended to provide the catalysts to accelerate recovery and put the economy back on a strong growth momentum," she said.

The global bonds were assigned investment grade ratings by major credit watchers Moody’s Investors Service, S&P Global Ratings and Fitch Ratings. The transaction is expected to settle on Dec. 10, 2020.

It said the positive news on the COVID-19 vaccine trials over the past couple of weeks had created strong inflows in the Asia-Pacific credit markets, which illustrated the government’s ability to capitalize on favorable market dynamics.

This deal followed the government’s $2.35-billion dual tranche global bond offering in May and the EUR1.2-billion dual tranche global bond offering in January.

Finance Secretary Carlos Dominguez III said the success of the third offering in the international capital market underpinned the international investor community’s recognition of the Philippine economy's strong fundamentals despite the global economic downturn caused by the COVID-19 pandemic.

"We believe this result indicated that international investors are aware of, and appreciate, the Duterte administration's resolve to rebuild the domestic economy and its initial headway in steering it back to its pre-COVID growth trajectory," he said.

"The prudent fiscal management and bold economic reforms that President Duterte put in place since he assumed office in 2016 are paying off. These initiatives have given the government headroom to spend on COVID-19 response even as it sustains its aggressive spending on infrastructure and other priority programs to revive the economy amid the global slowdown," he said.

Finance Undersecretary Mark Dennis Joven said that "despite the ramifications of COVID-19 on financial markets, especially in the Asia-Pacific region, the Republic’s successful dual-tranche issuance speaks volumes about the confidence of the market in the fundamentals of the economy, sound credit profile and its growth trajectory.”

Proceeds from the issuance will be used for the government's general purposes, including budgetary support.

Credit Suisse, Daiwa Capital Markets, Deutsche Bank, Morgan Stanley, Standard Chartered Bank, and UBS were the joint bookrunners for the transaction.

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