National Treasurer Rosalia de Leon / INQUIRER FILE PHOTO
The Philippines on Tuesday returned to Japan’s debt market after a year pf absence to borrow at least 55 billion yen (about P24 billion) through the sale of three-year samurai bonds.
National Treasurer Rosalia de Leon said the Philippines was the first-ever sovereign, nonresident samurai issuer whose transaction had a zero coupon (0.001 percent) even as it was usual among domestic issues in Japan.
This is the Philippines’ first offshore bond sale in 2021. Settlement will be on April 13 for the bonds maturing on April 12, 2024.
Tight spread
“The new three-year samurai tranche was priced at 21 basis points (bps) above the benchmark, the tightest spread the [Philippines] has achieved so far since its return to the market back in 2018,” the Bureau of the Treasury said in a statement, which meant the borrowing cost for the Philippines was low.
The Philippines did not tap the samurai market last year as the Treasury instead ramped up domestic borrowings.
Of the borrowing program worth P3.03 trillion for 2021, external borrowings—which include offshore bond issues and foreign loans from multilateral lenders as well as bilateral development partners—will contribute a gross amount of P442.4 billion.
De Leon earlier said besides the yen-denominated samurai bonds, the Philippines was also considering to issue renminbi-denominated panda, euro-denominated global bonds as well as US dollar-denominated IOUs for external financing. In 2020, it sold euro bonds and ventured into the US-dollar global bond market twice.
Finance Secretary Carlos Dominguez III said this was a good time for offshore commercial borrowings “while rates are still relatively low.”
The Treasury said it initially wanted to sell only 30 billion yen but the transaction was upsized following strong investor demand, allowing the deal to expand a new investor base for Philippine issuances.
The Philippines’ best credit rating was “A-,” which Japan’s top debt watcher Japan Credit Rating Agency Ltd. (JCR) last year upgraded from “BBB+”.
Investor confidence
“This landmark transaction highlights the government’s capability to respond to challenging times with creative solutions to free up fiscal space to augment the national government’s COVID-19 response,” De Leon said.
“The Philippines’ successful return to the Japanese bond market at this precarious time underlines the continued investor confidence in our economy,” Dominguez said.
The Treasury said SMBC Nikko Securities Inc. was the lead manager as well as book runner for this samurai issuance.