PH to resume offshore borrowing in 2014

Philippine government bonds to be sold offshore next year—the first ones to be issued abroad under an investment-grade regime—are expected to withstand jitters and sell-offs resulting from the likely tapering of stimulus by the US Federal Reserve.

This was according to National Treasurer Rosalia de Leon, who expressed confidence that the Philippine global bonds to be sold in 2014 would fetch low interest rates because of the positive impact of the investment grades.

“With the recent completion of our investment grade ascent, we expect incremental support from cross-border investors to keep our borrowing cost low, even with the impending onset of QE tapering,” De Leon said last week.

The government has yet to finalize its 2014 borrowing program, but an initial proposal called for it to sell $1 billion bonds in the international market early in the year.

The bond sale will be done amid speculations that the US central bank would soon taper its quantitative easing, or QE, program, under which it injects liquidity to the US economy through heavy bond purchases.

Because portions of the liquidity sometimes are used to buy emerging-market instruments, tapering of the stimulus from the US Fed is feared to cause a decline in demand for these instruments and to push interest rates up.

The jitters have begun to take hold, as some investors liquefy their investments in emerging-market assets even if the “QE tapering” has yet to happen. This is the reason some Asian stock market indices, including that of the Philippines, dropped last week.

De Leon, however, said the Philippine government’s debt papers would benefit from the investment grades that the country got this year.

For the first time in history, the Philippines was given investment grades by major international credit rating agencies.

Fitch Ratings lifted the country’s credit rating by a notch to the minimum investment grade in March. Standard & Poor’s and Moody’s Investors Service did the same in May and October, respectively.

The credit watchdogs all cited improvement in the country’s fiscal situation, its rising dollar reserves, and its robust economic growth that comes with modest inflation.

The Philippine government have decided not to sell bonds in the international market in 2013, a move aimed at helping ease the sharp appreciation of the peso in 2012.

Officials said the reduced dollar inflow resulting from the move prevented the peso from appreciating more sharply than it did. The peso throughout 2012 rose to close the year at the 41-to-a-dolllar territory. Nowadays, the peso hovers around the 43-to-a-dollar level.

For 2014, however, government finance officials have decided that the Philippines needs to go back to the international capital markets.

Finance Secretary Cesar Purisima said the country could not be absent in the offshore market for an extended period, adding foreign investors needed to be kept familiar with Philippine instruments.