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Panda bond issue raises P12B for PH

Yield higher than prevailing rate in China but at lower end of gov’t target range
By: - Reporter / @bendeveraINQ
/ 05:30 AM March 22, 2018

The Philippines has sold 1.46 billion renminbi or almost P12 billion in three-year panda bonds amid strong demand, although at a higher yield than the prevailing market rate in China.

From Beijing, National Treasurer Rosalia V. de Leon said late Tuesday that the country’s first panda bond issuance generated 9.22 billion renminbi or P75.9 billion in bids or 6.32 times bigger than the approved issue size.


“The achieved coverage ratio is the largest all-time among any sovereign panda issuance,” Finance Secretary Carlos G. Dominguez III said, quoting De Leon’s report.

“With substantial demand, we were able to push coupon to the lower end of price target of 5-5.6 percent,” Dominguez added.

The coupon rate was 35 basis points above the benchmark of 4.65 percent.

In a statement, the government’s Investor Relations Office (IRO) noted of the “tight spread,” even as it said that “relative to the government’s usual global dollar issuance, the panda bond’s 5-percent coupon would have an indicative dollar swap equivalent rate of 2.93 percent, 23 bps below current three-year dollar yield of 3.16 percent.”

As such, the Philippines became the first Asean country to sell the renminbi-denominated IOUs. It also “was able to diversify its investor base with participation from both onshore and offshore investors,” the IRO said.

With the bond connect scheme, offshore investors accounted for 87.7 percent of allocation, representing the highest offshore mix for any panda issuer, the IRO added.

“The Philippine government’s successful inaugural issuance of panda bonds highlights the investor confidence that the country enjoys on the back of its strong credit profile,” the IRO quoted Dominguez as saying.

“This is one of the concrete results of President Duterte’s independent foreign policy,” Dominguez added.

He said the successful issuance was a result of “good timing and teamwork with the Bank of China,” which served as the lead underwriter for the transaction.


Settlement of the bonds maturing in 2021 will be on Friday.

Budget Secretary Benjamin E. Diokno told a press conference yesterday that since the proceeds of the panda bond sale were fungible, the government could use it to fund any of the projects that were in the general appropriations act.

Earlier, the IRO said the panda bonds’ renminbi proceeds would be deposited with the Bangko Sentral ng Pilipinas then converted into peso “to help fund government infrastructure projects and other financing requirements.”

The government is embarking on the ambitious “Build, Build, Build” program aimed at ushering in the “golden age of infrastructure” in the country.

Under “Build, Build, Build,” the government plans to roll out 75 flagship, “game-changing” projects, with about half targeted to be finished within President Duterte’s term, alongside spending a total of over P8 trillion on hard and modern infrastructure until 2022.

The government was also eyeing to further jack up next year’s national budget, estimated by Diokno at a record-high P4 trillion, of which about P3.4 trillion will be cash.

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TAGS: National Treasurer Rosalia V. De Leon, panda bonds
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