Philippines returns to global debt market, raises $2B

MANILA — The Philippine government on Wednesday raised $2 billion in fresh borrowings from its issuance of dual-tranche US dollar bonds, the Marcos administration’s first offshore fundraising activity this year.

The Philippines raised $1 billion each via 10-year debt securities and 25-year sustainability notes during Wednesday’s US dollar bond offering, according to the final term sheets released by Bank of America, one of the bookrunners that the government hired for the issuance.

The offer came at a time when stubbornly high inflation has created a high-interest rate environment globally.

In a statement, the Bureau of the Treasury (BTr) said the government took advantage of improving market sentiment following a softer-than-expected US labor market print, which increased the odds of a rate cut by the Federal Reserve soon.

READ: Markets in Q1: The wild ride toward rate cuts

The bonds due in 2034 fetched a coupon rate of 5.25 percent, reflecting a tightening of 40 basis points (bps) from initial price guidance. The debt notes maturing in 2049 were priced at a higher yield of 5.60 percent, 45 bps lower than the initial price talk.

The BTr said the 10-year spread has been the tightest among all similar issuances by the Philippines since 2022, while the 25-year sustainability tranche achieved the second-best rate in the government’s history. “We secured funding from the market at very cheap rates, which allowed us to save on borrowing costs,” Finance Secretary Ralph Recto said.

“The tight pricing, especially compared to higher-rated peers, serves as an indication of the country’s exceptional performance beyond its current credit rating and makes a good case for a rating upgrade,” he added.

Dollar reserves down

Recto said the $2-billion debt offer was part of the Marcos government’s broader plan to raise $5 billion in financing from markets overseas this year.

Proceeds from the sale of 10-year debt securities will be used for “general budget financing” while the amount to be raised via 25-year bonds will be used for the same purposes but also for refinancing assets “in line with the Republic’s sustainable finance framework.”

READ: Philippines launches $3-B new overseas bond offer

Meanwhile, the Philippines’ dollar reserves declined in April mainly due to withdrawals made by the government to its external debts, the Bangko Sentral ng Pilipinas (BSP) reported.

Preliminary data from the BSP showed the country’s gross international reserves settled at $103.4 billion by the end of April, lower than the March level of $104.1 billion.