PH starts benefiting from ratings upgrade

After getting investment grade from all major credit-rating agencies, the Philippines has started enjoying cheaper financing, outperforming most of its Southeast Asian neighbors in terms of borrowing cost.

This was according to National Treasurer Rosalia De Leon, who said the country had started benefiting from the ratings upgrade through lower cost of financing compared with those charged on other countries in the region.

De Leon on Tuesday said the latest credit default swap (CDS) spread on Philippine government securities now stood lower than those on Malaysian, Thai and Indonesian securities.

CDS spread for five-year Philippine bonds stood at 99.5 basis points as of yesterday, tighter than the 111.5 basis points for Malaysian bonds and 114.5 basis points for Thai bonds of the same tenor.

It also had become much narrower than the CDS spread for five-year Indonesian bonds, which stood at 147 basis points.

CDS is an instrument that serves as an insurance against default. CDS spread is the premium over what is paid for the insurance instruments covering comparable US treasuries.

“We are now capitalizing on our better credit ratings,” De Leon said after attending the Philippine Business Conference held at the Manila Hotel.

She said that prior to the investment grade, CDS spreads on Philippine bonds were wider than those for Malaysian and Thai bonds.

De Leon said the Philippines was enjoying lower borrowing cost compared with other neighbors in Southeast Asia, except Singapore.

The Philippines this year was given investment grade for the first time by all three major global international credit rating agencies.

Fitch raised its rating for the country by a notch to the minimum investment grade in March. Standard & Poor’s followed in May, and Moody’s Investors Service did the same earlier this month.

In the meantime, the 20-year treasury bonds sold at an auction attracted market interest, with bids hitting P40.425 billion for the P20 billion that the government offered to sell.

The long-term bonds fetched a rate of 4.512 percent, up by 99.5 basis points from the 3.157 percent recorded in the auction for the same tenor held in March.

The Bureau of the Treasury found the bids competitive and comparable with those in the secondary market. It accepted P20 billion worth of bids to raise the amount stated in the borrowing schedule.

“In today’s auction, the market showed significant appetite for the long-term instrument. This is a positive development considering that in the past auctions, demand was more for short-term instruments,” De Leon said.