Latest Stories

Gov’t plans inflation-linked bonds

Funding option to cover part of 2013 deficit


The Philippine government is planning to issue inflation-linked peso bonds to fund part of its deficit this year, taking advantage of the slow rise in consumer prices to secure cheap funding.

National Treasurer Rosalia de Leon on Tuesday said the Philippines might join neighbors like Thailand and South Korea, which have both issued inflation-link bonds. “It’s an option for funding, (but) we’re still doing legwork,” De Leon said.

Inflation-linked bonds eliminate the risk of inflation eating up the returns of a particular issuance, making them more attractive to investors.

“The right time to issue inflation-linked bonds is when inflation is not a problem. This gives investors the confidence because they know that inflation will not (affect their returns),” HSBC Philippines chief executive Jose Arnulfo Veloso said in an interview.

Last week, the Bangko Sentral ng Pilipinas (BSP) revised its inflation outlook for the year lower to 3.1 percent from 3.2 percent. This was after inflation for the month of May settled at 2.6 percent, below the BSP’s 3-5 percent target for the year.

Veloso said long-term investors who were willing to have their money locked-in would be the main target for the inflation-linked paper. He said that since yields were adjusted to inflation, investors would be assured that their returns would not diminish over time.

Last March, Thailand raised $1.3 billion from the sale of 15-year inflation-linked bonds with a competitive 1.25-percent coupon rate.

This week, De Leon said the Treasury would meet with insurance companies, which favor long-term, low-risk investments, and other possible investors to drum up interest in the planned bond issuance.

In an interview with Bloomberg, De Leon added that the government also had plans to borrow as much as $2 billion overseas, half through a global bond issuance and the rest from multilateral lenders like the World Bank, to cover as much as a tenth of the state’s funding needs.

The plan to raise funds using new methods come after consecutive ratings upgrades for the Philippines given by Standard & Poor’s and Fitch Ratings, two of the three major international credit-rating firms.

Follow Us

Follow us on Facebook Follow on Twitter Follow on Twitter

Recent Stories:

Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

Tags: Business , Government , inflation-linked bonds

  • joboni96

    to pilipinos only to fund needed mega projects

    1. remove intsik switik banks from the loop
    2. lower interests costs to government > more projects
    3. pilipinos will have higher interest income specially overseas pilipinos remittances
    4. people’s identified needed projects implemented
    5. pogi points for pnoy

  • erine0

    Is this in preparation for mopping up of liquidity?

  • rickysgreyes

    Government bonds are always oversubscribed, why enter into new types of bonds which could cost the govt more in the long run?

Copyright © 2014, .
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94


  • Camilla’s brother dies in US after head injury
  • Luisita farmers storm DAR compound
  • Trillanes, Ejercito confident they are not in Napoles’ list
  • Easterlies to prevail in Luzon, Visayas
  • Lacson eyes P106-B ‘Yolanda’ rehab masterplan
  • Sports

  • Mixers trim Aces; Painters repulse Bolts
  • Donaire junks Garcia as coach, taps father
  • ’Bye Ginebra: No heavy heart this time
  • UAAP board tackles new rules
  • Baguio climb to decide Le Tour de Filipinas
  • Lifestyle

  • Photos explore dynamics of youths’ sexual identity
  • 12th Philippine Food Expo set at the World Trade Center
  • No tourist draw, Malang the croc will remain wild
  • The best flavors of summer in one bite, and more
  • Homemade yogurt, bread blended with pizza, even ramen
  • Entertainment

  • Sony developing live-action Barbie comedy
  • California court won’t review Jackson doctor case
  • Return of ‘Ibong Adarna’
  • Practical Phytos plans his future
  • In love … with acting
  • Business

  • Facebook profits triple as mobile soars
  • Insular Honors Sales Performers at Testimonial Rites
  • Apple increases stock buyback, will split stock
  • Cost-recovery provisions for affected gencos urged
  • This time, BIR goes after florists
  • Technology

  • Top Traits of Digital Marketers
  • No truth to viral no-visa ‘chronicles’
  • ‘Unlimited’ Internet promos not really limitless; lawmakers call for probe
  • Viber releases new design for iPhone, comes to Blackberry 10 for the first time
  • Engineers create a world of difference
  • Opinion

  • Editorial cartoon, April 24, 2014
  • Talking to Janet
  • Respite
  • Bucket list
  • JPII in 1981: walking a tightrope
  • Global Nation

  • Filipinos in Middle East urged to get clearance before returning
  • PH seeks ‘clearer assurance’ from US
  • China and rivals sign naval pact to ease maritime tensions
  • What Went Before: Manila bus hostage crisis
  • Obama arrives in Tokyo, first stop of 4-nation tour
  • Marketplace