The Philippine government returned to the international capital markets for the first time in 2024, successfully placing $2 billion in dual-tranche 10-year and 25-year fixed-rate global bonds.
The Department of Finance said in a statement Wednesday the government took advantage of improving market sentiment following a softer-than-expected US labor market print which alleviated concerns over the Fed rate path. The success of the offering illustrated the Philippines government’s ability to navigate an uncertain policy rate environment and respond efficiently to capture conducive market conditions, it said.
The transaction attracted robust demand and strong orderbook momentum carried across markets, with interest from a diverse pool of high-quality global accounts, showcasing investors’ confidence in the Philippine government’s credit profile and long- term outlook.
“The enthusiastic response we saw from the global investor community for this offering underscores the strength of the Philippine economy and the strong vote of confidence international investors have in President Ferdinand R. Marcos, Jr.’s sound economic and fiscal policies,” Finance Secretary Ralph Recto said.
“We secured funding from the market at very cheap rates, which allowed us to save on borrowing costs. 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. The tight pricing, especially compared to 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,” Recto said.
National Treasurer Sharon Almanza said the strong reception and record tight pricing levels attained on the transaction “reaffirms the Philippines position as a true watermark for quality emerging market credit stories, and the success of the offering in the face of various market uncertainties over the past few months shows the continued confidence of the broader investor community in the progress of our economic development”.
The 25-year global bond will be issued under the Republic’s Sustainable Finance Framework, marking its fifth G3 ESG bond offering. This follows the $1-billion 5.5-year Sukuk in December 2023, $3-billion triple-tranche bond offering in January 2023, $2-billion triple-tranche bond offering in October 2022, 70.1-billion-yen four-tranche Samurai bond offering in April 2022 and $2.25-billion triple-tranche bond offering in March 2022.
The new 10-year tranche was priced at T+80 bps, reflecting a tightening of 40 bps from initial price guidance. The new 25-year Sustainability tranche was priced at 5.60 percent at par (T+99.8 bps), 45 bps tighter than the initial price guidance.
The global bonds are expected to be rated Baa2 by Moody’s, BBB+ by Standard & Poor’s and BBB by Fitch. The transaction will settle May 14, 2024.
Recto said proceeds the from issuance would be directed towards the overall welfare of all Filipinos in terms of more infrastructure projects, improved social services, a better healthcare system and quality education.
BofA Securities, Citigroup, HSBC (B&D), J.P. Morgan, Morgan Stanley, Standard Chartered Bank and UBS are acting as joint bookrunners for the transaction.