Gov’t looking to raise USD 500 million from Samurai bonds

The Philippine government is eyeing to raise about USD 500 million (PHP 29.22 billion) from an offering of Japanese yen-dominated bonds within the year, Finance Secretary Ralph G. Recto said on Tuesday.

Mr. Recto said the government is also targeting to issue euro bonds in the second half, alongside its planned offerings of yen- and dollar-denominated papers.

“I think we will begin issuing the USD 3 billion that we need to borrow this year soon,” he told reporters on the sidelines of an event late on Tuesday. “The process has started, I’ll put it that way, because I signed (the authority) already.”

The bonds will likely be issued in tranches within the year, with the Samurai bonds possibly issued last, Mr. Recto said.

The government planned to borrow $5 billion this year, of which USD 2 billion was raised from the issuance of global bonds last May. The remaining USD 3 billion has yet to be raised.

The Philippines last issued Samurai bonds in April 2022, raising ¥70.1 billion.

“Based on our advisors, I think it is the optimum time to get lower rates. The idea is to do it to get the cheapest borrowing cost,” Mr. Recto said in mixed English and Filipino.

Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the government will likely start borrowing once the Philippine and US central banks begin cutting rates.

“Government will wait until cuts start coming in (both from the Bangko Sentral ng Pilipinas and US Federal Reserve). With lower interest rates, this means cheaper debt, so you’re looking at cost efficiency for government-issued debts,” he said in a Viber message.

The Fed is expected to keep interest rates steady this week, but easing may start as early as September as inflation neared the 2% target.

On the other hand, the BSP earlier signaled a potential 25-basis-point cut as early as August.

“The best time to borrow is when you need it. The dollar is strong versus the peso, but the yen is weaker against the peso these days, so it’s probably gonna be more or less a wash,” House Ways and Means Committee Chairman and Albay Rep. Jose Ma. Clemente S. Salceda said in a Viber message.

The government’s plan to issue Samurai bonds reflects how strapped for resources it has become, said Ateneo de Manila University economics professor Leonardo A. Lanzona.

He also noted that these borrowings could fan inflation.

“The problem with lower interest rates which they expect to do once the Fed reduces their policy rates is the possible splurge of government money into the system. As such, inflation may increase, which could force the BSP to raise its interest rates again,” Mr. Lanzona said in a Facebook Messenger chat.

On Tuesday, Mr. Recto also told reporters that it will wait for the BSP and the Fed’s monetary policy decisions before its planned external borrowings for next year.

The National Government (NG) set its borrowing program at P2.55 trillion for 2025, of which PHP 507.41 billion will come from gross external borrowings.

In the coming months, the government must be “more introspective and be aware of the inflationary consequences of their actions” and be more cautious of their spending, Mr. Lanzona said.

As of end-June, the NG’s outstanding debt rose to a fresh high of PHP 15.48 trillion, with 31.71% of the total or PHP 4.91 trillion coming from foreign sources. – Beatriz Marie D. Cruz, Reporter