PH raises USD2B from dollar bond sale

The Philippines raised USD 2 billion (PHP 114.7 billion) from its first global bond sale this year, the Bureau of the Treasury (BTr) said on Wednesday.

The issuance of the dual-tranche 10- and 25-year fixed-rate global bonds had a “strong reception and record tight pricing levels,” National Treasurer Sharon P. Almanza said in a statement.

The 10-year notes were priced at 80 basis points (bps) above US Treasuries, tighter than the initial pricing of US Treasuries plus 120 bps.

The 25-year sustainability bonds were priced at 5.6% at par, which is also tighter than the initial price guidance of 6.05%.

Finance Secretary Ralph G. Recto said the government secured the funding at “very cheap” rates.

“The 10-year spread has been the tightest among all our similar issuances since 2022, while the 25-year sustainability tranche achieved the second-best rate in the government’s history,” he said in a statement.

“The tight pricing, especially compared with 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.

The dollar bonds are shelf-registered with the US Securities and Exchange Commission and will be settled on May 14.

Proceeds from the issuance will be used for general budget financing, the Treasury said. Funds raised from the 25-year debt will also be used for “refinancing programs and expenditures in line with the republic’s sustainable finance framework.”

Bank of America, Citigroup, HSBC, JPMorgan, Morgan Stanley, Standard Chartered and UBS were tapped as the joint bookrunners.

On Tuesday, Fitch Ratings, Moody’s Ratings and S&P Global Ratings rated the proposed bond offer at “BBB,” “Baa2” and “BBB+,” respectively, matching their ratings for the Philippines’ sovereign debt.

The BTr said the transaction attracted interest from a “diverse pool of high-quality global accounts.”

“Despite elevated volatility in the US Treasury rate markets in recent weeks, the republic took advantage of improving market sentiment following a softer-than-expected US labor market print which alleviated concerns over the Fed rate path.”

The bond sale showed “strong demand at much lower borrowing costs versus initial guidance,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

“In line with the earlier guidance, it is actually on the high side which is a good signal in terms of large market demand and takeup,” he added.

Last year, the Philippine government raised USD 3 billion from its three-tranche dollar bond sale in January, USD 1.26 billion from its retail dollar bond issue in October and USD 1 billion from its maiden issuance of Sukuk bonds in December.

The government’s borrowing program is set at PHP 2.57 trillion this year, a quarter of which will come from foreign sources.

The government borrows from external and local sources to fund a budget deficit capped at 5.6% of the gross domestic product. — By Luisa Maria Jacinta C. Jocson, Reporter