MANILA, Philippines — The Philippines has sold 1.2 billion euros in euro-denominated bonds across two tenors, with the three-year debt paper fetching a zero-coupon.
Citing a report from National Treasurer Rosalia V. de Leon, Finance Secretary Carlos G. Dominguez III said Wednesday that the euro bonds were issued in tenors of three and nine years.
In a separate text message, De Leon said 600 million euros each were sold for both tenors, exceeding the benchmark volume of 500 million euros.
“We issued the three-year with a yield of 0.1 percent, allowing us to print at a zero-percent coupon for a global bond with a spread of 40 basis points (bps) over benchmark,” de Leon reported to Dominguez.
As such, “this is [the Philippines’] lowest coupon euro issuance and first-ever zero-coupon euro issuance in the international capital markets,” Dominguez noted.
“For the nine-year, we achieved a coupon of 0.75 percent, which is tighter than the 0.875 percent in our previous eight-year issuance last May 2019 despite the longer tenor,” de Leon said.
“Moreover, given the fair value of our outstanding euro bond due 2027 (with a 7.5-year remaining life) being at 67 bps over benchmark, and given a pick up of about 5 bps for every one-year extension, new nine-year should be priced at around 75 bps, yet we managed to pierce through our ROP curve by pricing at 70 bps over benchmark. This translates to a negative new issue concession of approximately 5 bps,” de Leon added.
Last year, the Philippines returned to the euro debt market to end the country’s 13-year absence, selling 750 million euros in eight-year bonds.
For this year’s euro bond sale, tenders reached 5.5 billion euros, making the offer 3.58 times oversubscribed, de Leon said.
“Orders came from a diverse group of investors both in the onshore and offshore market, with frequent as well as new names on the books,” she said.
“We are also reaping the benefits of actively engaging investors prior to going out in the market,” she added.
De Leon said settlement of the euro bonds will be on Feb. 3.
For Dominguez, “credit must go to President Duterte for his unwavering support for the economic management team, Department of Finance and Bureau of the Treasury professionals, and our bankers,” he said.
The Treasury was looking at possibly selling dollar-denominated global bonds—which in the past had been the Philippines’ opening salvo in its annual offshore bond issuances—“back-to-back” or soon after the euro bond sale.
The Philippines may also sell renminbi-denominated panda bonds and yen-denominated samurai bonds during the first half of the year, ahead of Japan’s hosting of the 2020 Tokyo Summer Olympic Games.
For 2020, the bulk or 75 percent or P1.05 trillion of programmed borrowings will be from domestic sources, while the balance of P350 billion will be sourced externally.
Amid flushing domestic liquidity, the government had been preferring to source the majority of its funding requirements locally to minimize foreign exchange risks.
Of the 2020 foreign borrowing program, $3.5 billion will be commercial borrowings through the sale of debt paper, while about $3 billion will come from program and project loans to be extended by bilateral development partners as well as multilateral lenders.