The government sold P25 billion worth of debt paper Tuesday on lower interest rates on expectations that the US Federal Reserve Board will be less aggressive on its own rate hikes this year.
Bond rates averaged 3.647 percent in Tuesday’s auction, down 15.3 basis points from the rate of 3.8 percent.
“We had a robust set of bids that came in, so we are happy about that. And based on our internal analysis, we were able to achieve better levels than what we are expecting to accept,” National Treasurer Roberto Tan told reporters after the auction.
Tan said the announcement of Fed chair Janet Yellen that interest rates would probably be less than what it was originally looking at in December and the volatile global market tempered the bids of investors.
Tenders for the government’s P25-billion bond offering was oversubscribed at P56.002 billion.
The reissued debt papers have a remaining life of five years.
“The announcement of probably less policy rate hikes this year or even none at all created an environment where forward looking interest rates in fact plateaued,” Tan said.
Tan, meanwhile, said the government had not decided on a planned $2-billion bond sale after securing a shelf registration in the US Securities and Exchange Commission.
“We’re continuing to watch the developments of the international financial markets. We will make a decision when we think it’s optimal to launch an issue. Right now there’s no decision so far,” Tan said.
The Philippines recently secured the approval of the US SEC for an additional $5-billion debt shelf as a requirement for the possible bond sale.
A debt shelf acts like a credit line with the balance reflecting the allowable amount of debt an issuer can float in a particular currency.
Tan said the government asked the help of four lead coordinators to arrange the bond sale—Standard Chartered, HSBC, Dolce and Citibank—and lead managers such as JP Morgan, Morgan Stanley, UBS and Credit Suisse to monitor the market.
“We’ve already advised them and they’re already helping us monitor the market and provide advice,” Tan said.
“Definitely we will look at the appetite of our existing as well as new investors for emerging market paper, particularly the Philippines. They advise us and we also have internal monitoring of movements and volumes of Phlippine bonds and other emerging market bonds,” Tan added.
Tan said the $5-billion shelf could be used for subsequent issuances.
“We applied for $5 billion, that’s your headroom. As you issue bonds, you use up that $5 billion. As long as you have unutilized shelf you can use that,” Tan said.
Of the $2 billion planned bond issue, $750 billion is the maximum amount for new money and the rest for liability management.