The government is preparing to issue benchmark-size euro-denominated bonds this month to take advantage of favorable interest rates and diversify funding sources.
Debt watchers S&P Global Ratings and Fitch Ratings assigned investment-grade ratings to the proposed euro bonds after the Bureau of Treasury hired Citigroup Inc., Credit Suisse Group Inc. Standard Chartered Plc. and UBS Group AG to arrange investor calls on Jan. 20.
S&P said it assigned “BBB+” long-term foreign currency issue rating to the proposed bond issuance, the same rating of “BBB+” with a stable outlook it gave to the Philippines in April 2019.
“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.
S&P had a higher rating for the Philippines compared to the one issued by Fitch.
Fitch said it assigned an expected rating of “BBB” to the proposed bond issuance.
“The expected rating is in line with the Philippines’ long-term foreign-currency issuer default rating ‘BBB’ with a stable outlook,” Fitch said.
“The rating would be sensitive to any changes in the Philippines’ long-term foreign-currency IDR,” it said.
Fitch affirmed the Philippines’ long-term foreign- and local-currency IDRs at “BBB” with a stable outlook in May 2019.
Finance Secretary Carlos Dominguez III earlier said the government was planning to price its foreign bond issuances this year at “even tighter” spreads amid expectations of a credit rating upgrade in the medium term and policy easing from global central banks.
He said the country was able to secure tight spreads for as low as 32 basis points over benchmark compared to other countries last year. He said the government would likely continue on this trend if “favorable market conditions” permit.
The country was also able to keep its first renminbi-denominated Panda bond float in 2018 in tight spreads as well as its return to the Samurai bond market that year.
The government’s 10-year global bond issue in January last year worth $1.5 billion was priced at 3.75 percent, 110 bps higher than the benchmark US Treasury and tighter than an initial 130 bps guidance.
The Finance Department said the country’s return to the European market after more than a 10-year hiatus in May 2019 saw its eight-year global bond float worth 750 million euros ($839.4 million) priced at 70 bps above benchmark, “the lowest-ever EUR yield for a sovereign issuer outside the European Economic Area.”