Imminent rate cuts driving PH firms to bond market

Domestic bond listings this year may still reach P400 billion—the Philippine Dealing and Exchange Corp.’s (PDEx) original target—following much optimism from companies ahead of an anticipated interest rate cut.

PDEx president and CEO Antonino Nakpil told reporters on Thursday that while they had initially projected a shortage in listings on the bond exchange, they now had “quite a lot” of offerings starting to line up.

So far, the PDEx has seen P177.14 billion worth of domestic bond listings this year from more than 10 offerings. The bond exchange’s target for the year is roughly double last year’s total listings worth P209.33 billion.

According to Nakpil, companies were initially reluctant to issue bonds due to the high interest rate environment.

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High interest rates are typically not favorable to bond issuers, as these result in lower bond prices. On the other hand, low interest rates mean higher prices for issuers.

But the Bangko Sentral ng Pilipinas’ sentiments on a potential rate cut in August is driving optimism among companies planning to tap the debt market to raise funds, the PDEx chief said.

Nakpil cited the P6-billion bond listing of Ayala Land Inc. as among the examples of companies that deliberately waited until the second half of the year to issue bonds in time for a rate cut.

“If [interest rates] are already falling, then more will come in to list [bonds],” he said, adding that corporations may also come in with bonds that have longer maturity dates.

Longer bond tenors usually allow issuers to lock in lower interest rates—therefore a more favorable borrowing cost—for a longer period. This also signals that bondholders are confident in the issuer’s capacity to repay the debt.

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Sy family-led BDO Unibank Inc. is among the companies that will issue bonds this month. The country’s largest bank is set to list P5 billion worth of sustainability-linked bonds on the PDEx on July 24 after shortening its offer date due to strong demand from retail and institutional investors.

Meanwhile, Ayala-led Bank of the Philippine Islands (BPI) has started its P5-billion bond issuance, with listing set on Aug. 9.

Diversified conglomerate San Miguel Corp., led by billionaire Ramon Ang, also listed P20 billion worth of bonds last month as part of its P50-billion bond program meant to retire an existing dollar-denominated debt obligation and fund the rehabilitation of the Ninoy Aquino International Airport.