PHL is looking at $2.5 billion in dollar bonds

By means of Aaron Michael C. Sy, Reporter

The government wants to raise between $2 billion and $2.5 billion from an oFOffering U.S. dollar-denominated global bonds, Treasury Secretary Ralph G. Recto said in a speech text on Wednesday.

In a statement late Wednesday, the Bureau of the Treasury (BTr) said the Philippines has started offering the triple tranche of 5.5-year, 10.5-year and 25-year sustainable global bonds.

“The Republic will partially allocate the proceeds from the 25-year sale of global bonds to assets covered by the Republic’s Sustainable Finance Framework,” the BTr said.

Moody’s Ratings said the global bond oFThe fering will have a benchmark size. A benchmark size for a dollar bond oFThe interest amounts to 500 million dollars.

Fitch Ratings assigned the bonds a “BBB” rating, while Moody’s Ratings gave “Baa2” and S&P Global Ratings assigned a “BBB+.” This miron the ratings of the Philippine issuers.

Moody’s said in a note that the bonds will come from the Philippine government’s existing shelf program, which includes tranches maturing in 2030, 2035 and 2049.

“The proceeds from the bonds do intended for general purposes, including budget support,” the report said.

Moody’s said part of the tranche maturing in 2049 “is also intended for eligible projects under the Philippine Sustainable Finance Framework.”

“We think demand for this will remain quite solid given that the outlook for the Philippines remains bright given the improving fundamentals of the economy,” said Emilio S. Neri, Jr., chief economist of the Bank of the Philippine Islands ( BPI), in a Viber message. .

The government plans to borrow $5 billion this year, of which $2 billion was raised from the global bond issue last May. That still leaves $3 billion yet to be raised.

Mr Recto previously said the government was also considering issuing Samurai bonds this year. The PhilipPines last issued Samurai bonds in April 2022, raising ¥70.1 billion.

“The easing of monetary policy will cause many foreigners to leave the country FIRMs can benefit from this problem, especially those that are local. The sale of these bonds will benefit the National Government (NG) due to the weak US dollar and declining interest rates,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said. in a Viber message.

The BSP has lowered interest rates for the US economy Fthe first time in almost four years that marks the start of a ‘calibrated’ easing cycle amid an improvingFand economic prospects. The Monetary Board cut its target reverse repurchase rate by 25 basis points to 6.25%, down from a 17-year high of 6.5%.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said the timing of the oFferment is beneficial.

“Relatively lower long-term interest rates that reduce the need for creditFNG’s financing costs, amid the recent rising peso exchange rate, could therefore reduce NG’s debt service,” he said in a Viber message.

The local unit closed at P56.281 per dollar on Tuesday, up 5.2 centavos from P56.333 FThis became apparent last Thursday, according to data from the Bankers Association of the Philippines. This was the strongest peso Falmost done Ffive months or since the closing rate of P56.255 per dollar on April 1.

Year to date, the peso is down 91.1 centavos from its P56.281 Fend on December 23, 2023.

“Some investors are also locking in rates before Fed and other central bank rates fall further in the coming months,” Ricafort said.

The US Federal Reserve is widely expected to start cutting interest rates in September, following Chairman Jerome H. Powell’s dovish stance last week.

Analysts also expect the BSP’s easing cycle to continue into next year, with rate cuts of at least 100 basis points in 2025.

The government’s borrowing program this year is set at €2.57 trillion, of which 20% will come from foreign sources.

The government borrows from external and local sources to finance a budget deficit limited to 5.6% of gross domestic product.