MANILA (Bloomberg): The Philippines is tapping the international bond market for the second time this year, seizing the opportunity to fund state spending as borrowing costs eased on optimism over a potential US-Iran agreement.
The sovereign issuer is offering notes of 5.5 years and 10 years, and reopening its bond due in January 2051, the Bureau of the Treasury said in a statement on Tuesday. Initial price guidance for the 5.5-year tranche is around 85 basis points over US Treasuries and about 125 basis points for the 10-year paper. The tap of the 25-year bond has an initial indicative yield of 6.1%. The bonds are expected to be priced later during New York trading hours.
"We’re taking advantage of the tailwind,” National Treasurer Sharon Almanza said by phone, citing market optimism over the resolution of the US-Iran conflict. "Compared to what the domestic rates are now, these are more reasonable.”
More Asian borrowers are tapping the US dollar bond market on Tuesday, capitalizing on favorable market conditions with credit spreads near their record-tight levels and credit default swap premiums falling.
The Philippine Treasury rejected some bids at recent bond auctions to prevent the government’s borrowing costs from rising too sharply. At an auction of 7-year Treasury bonds on Tuesday, the average yield rose 13.6 basis points to 6.779%.
The Southeast Asian nation is one of the region’s most active sovereign bond issuers in overseas markets and uses the money to help finance a persistent budget deficit. It has planned to borrow a total of 2.68 trillion pesos for this year, of which 302 billion pesos will come from the foreign debt market. It raised $2.75 billion in dollar bonds in January.
The Philippine dollar bonds being marketed are expected to be eligible for the JPMorgan Chase & Co.’s Emerging Markets Bond Index, a primary tool for investors to gauge the risk of emerging market fixed-income securities, according to people familiar with the bond sale.
BNP Paribas, Citigroup, HSBC, JPMorgan, MUFG, and Standard Chartered Bank are the joint lead managers and bookrunners for the transaction.
--With assistance from Harry Suhartono. -- Bloomberg
