PH taps China debt anew

The Philippines on Wednesday raised 2.5 billion renminbi from its second foray in China’s panda debt market.

Deputy Treasurer Erwin Sta. Ana told reporters after Wednesday’s treasury bond auction that the three-year renminbi-denominated panda bonds will be settled on
May 20.

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

The Bureau of the Treasury earlier wanted to sell a bigger volume of up to $500 million in renminbi-denominated securities for the second panda bond issuance.

It had also considered two tenors of three and five years.

The Treasury later on downscaled the offering and reduced the tenor to just one.

Just last week, the Philippines returned to the euro debt market, selling 750 million euros in eight-year global bonds at a coupon of 0.875 percent.

It ended the country’s 13-year absence in the euro market, which was last tapped in 2006.

Besides the panda and euro bonds, the government is also looking at again selling yen-denominated samurai bonds and another round of US dollar-denominated global bonds in the second half.

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

The Philippines also borrowed $1.5 billion in new 10-year global bonds last January.

The government had programmed gross borrowings this year of P1.189 trillion, of which the bulk or P906.2 billion will be sourced locally through the sale of treasury bills and fixed-rate bonds.

Gross external borrowings for 2019 will amount to P282.7 billion.

These borrowings will finance the government’s priority projects under the national budget as well as the Duterte’s administration’s ambitious “Build, Build, Build” infrastructure program.

Meanwhile, the Treasury on Wednesday sold all P20 billion in reissued seven-year bonds at an average rate of 5.743 percent.

Sta. Ana noted that the yield was 19.1 basis points lower than the annual rate of 5.934 percent when the debt paper maturing on Feb, 14, 2026, was last reissued.

The coupon was also a higher 6.25 percent when the IOUs were first issued in February.

Investors tendered a total of P51.3 billion, making the auction two-and-a-half times oversubscribed.

With the full award, the outstanding amount for this bond series stood at P70 billion to date.

Sta. Ana said the “good turnout” for the treasury bond auction as well as the lower rate were “still an offshoot of the rate cut last week and, of course, the easing inflation picture as projected by the central bank.”

Last Thursday, the Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board cut the policy rate by 25 bps to 4.5 percent amid slowing inflation as well as economic growth.

The headline inflation rate eased to a 16-month low of 3 percent in April, averaging 3.6 percent during the first four months—already within the government’s 3-4 percent target range.

However, gross domestic product growth fell to a four-year low of 5.6 percent in the first quarter mainly due to slower public investments, especially on infrastructure, as a result of the 2019 budget impasse.