PH eyes more debt paper sale in China, Japan

MANILA, Philippines — The government plans to again borrow through the panda and samurai bond markets this year after successful issuances last year that raised additional financing for its priority programs, including the ambitious “Build, Build, Build.”

“We told bankers that our policy now is not to be absent from any major market for long periods. For the samurai, we are going to come back within 12-18 months from August. In China, we will come back to the market again within 12-18 months from last March. And we are going to explore doing something in England,” Finance Secretary Carlos G. Dominguez III said in a statement Wednesday.

Finance officials had said they were also exploring issuance of euro bonds in the European market as well as of sukuk or Islamic bonds.

In March last year, 1.46 billion renminbi (P12 billion) in three-year panda bonds were sold by the Philippine government for the first time in China at a 5-percent yield.

Last August, the Philippines also sold 154.2-billion yen (P74 billion) in samurai bonds across three tenors, ending the country’s eight-year absence in the Japanese debt market.

The government will also sell dollar-denominated global bonds early this year.

Given persistent global uncertainties, including the US Federal Reserve’s string of interest rate hikes, Dominguez said he already asked National Treasurer Rosalia V. de Leon “to move the timelines of future bond issuance ahead of schedule.”

“Because of all the announcements and all the uncertainties that are going to start hitting more, impacting the market more, it’s better to bring the issuance forward earlier,” the Finance chief explained.

For Dominguez, “participating in the panda and samurai bond markets, as well as exploring other debt securities markets in and outside of Asia, would help diversify the government’s borrowing portfolio as it rolls out more of its ‘Build, Build, Build’ infrastructure projects.”

The “Build, Build, Build” infrastructure program will tap the national budget as well as official development assistance (ODA) or loans and grants from Japan, China and multilateral lenders in rolling out big-ticket projects.

Under “Build, Build, Build,” the government plans to start 75 “game-changing” projects, with about half targeted to be finished within the term of President Rodrigo Duterte, alongside spending over P8 trillion on hard and modern infrastructure until 2022 to usher in “the golden age of infrastructure.”

Dominguez said the successful sale of dollar, panda and samurai bonds last year, which fetched tight spreads, “underscore the strong confidence of the international business community in the country’s growth narrative on the Duterte watch.”

The Finance chief noted that last year’s global bond issuance had a “tight” spread of 37.8 basis points over the US Treasuries; the panda bonds, a spread of just 35 basis points over the benchmark; while the samurai bonds, a weighted average spread of 34.7 basis points above benchmark across multiple tenors.

These tight spreads “illustrate confidence in the way the Duterte administration has soundly managed the country’s fiscal program,” Dominguez said.

The government will ramp up borrowings this year, such that the amount would breach the P1-trillion mark for the first time.

De Leon had said total borrowings for 2019 were expected to reach P1.189 trillion, with the bulk or P891.7 billion to be sourced locally, mainly from the auction of treasury bills and bonds.

The 2019 borrowing mix will be 75-percent domestic, 25-percent external.

The bias for domestic borrowings would minimize foreign exchange risks, economic managers had explained.

Foreign borrowings, meanwhile, will come from offshore bond issuances as well as ODA.

Despite increasing borrowings, the government expects economic growth to outpace debt, such that the debt-to-gross domestic product (GDP) ratio was projected to decline to 38.8 percent by 2022 from 42.1 percent in 2017, according to the interagency Development Budget Coordination Committee (DBCC).  /muf