Gov’t eyes fresh bond float abroad

The Philippine government, one of Asia’s most active sovereign debt issuers, is preparing to re-enter the offshore bond market when the opportunity arises in the near future.

Banking sources said the Philippines was now seeking a request for proposal (RFP) or an invitation among potential arrangers to submit a plan for a fresh bond issue.

The Aquino administration has not made any firm plan yet but is seen preparing to grab the next window of opportunity in the volatile global markets, whether before the year ends or in early 2012.

The Philippines has usually done the curtain-raising in the region by becoming the first to tap offshore debt markets at the beginning of the year. It was earlier reported that the Philippine government was planning to raise $1 billion from the offshore bond market in early 2012.

Seeking RFPs from banks is seen as an “opportunistic” move for the Philippine sovereign, which is now rated one notch below the much-coveted investment grade by Fitch Ratings and two steps below by both Standard & Poor’s and Moody’s.

“When the market opens, they execute,” one banker said.

Asked about the prospective offshore bond foray, Rosalia de Leon, head of the international finance group at the Department of Finance, said the government had “no definite plan” at the moment.

Risk premium paid by holders of Philippine offshore cash bonds, or ROPs, narrowed in recent days after global central banks undertook coordinated action to keep ample global liquidity amid the lingering euro zone crisis.

As of Friday, such risk as measured by credit default swaps on benchmark five-year ROPs declined 7 percent from a month ago to 190 basis points. At this level, Philippine bonds were trading better than comparative bonds issued by Indonesia (217 bps) although lagging South Korea’s 148 bps, Malaysia’s 139 bps and China’s 138 bps.

Philippine risk is also now perceived to be much lower than the CDS spreads on developed European states like Italy (455 bps) and Spain (384 bps) and is at par with France’s 193 bps as of Friday. Risk premium on Greece, which is at the epicenter of the European Union’s fiscal crisis, is at a staggering 5,500 bps.

The government raised $1.25 billion from the issuance of global peso bonds last January and $1.5 billion in 15-year global bonds in March this year.