High liquidity and optimism on the economy pushed investors to swamp the auction Wednesday for the government’s $500-million onshore dollar bond issue.
Bids for the bonds, which were denominated in dollars but sold in the local market, reached $1.74 billion. The Bureau of the Treasury, however, stuck to the borrowing program and accepted only $500 million.
The bonds, which will mature in 2023, fetched a coupon rate of 2.75 percent. The Treasury said the yield could be considered low, noting that bonds with the same maturity and issued by other countries in the region carried higher interest rates.
National Treasurer Rosalia de Leon said the result of the auction on Wednesday indicated a strong appetite among investors for Philippine debt securities in the wake of favorable developments on the domestic front. The bond auction followed the announcement by the National Statistical Coordination Board that the Philippine economy grew by a faster-than-expected 7.1 percent in the third quarter from a year ago. This brought the average growth for the first three quarters of the year to 6.5 percent.
“This exercise [onshore sale of dollar-denominated bonds] exhibits the [Philippines’] determination to take advantage of opportunities in the market that allows us to improve our debt portfolio,” De leon told reporters after the auction.
The government found it prudent to raise dollars from the local market given the excess foreign exchange liquidity of banks in the country. De Leon said borrowing dollars from the local market was less expensive for the government.
Raising dollars from the domestic market was also advised by the Bangko Sentral ng Pilipinas to ease the appreciation pressures on the peso. Had the government secured dollars from abroad, the resulting foreign exchange inflow could have led to a further strengthening of the peso, which has risen by about 7 percent since the start of the year against the greenback.
Proceeds of the dollar bonds will be used to pay the maturing obligations of the national government and meet the expenditure requirements of the state-owned Power Sector Assets and Liabilities Management Corp..