Government raises over P19 billion from Panda bond issue

The government raised more than P19 billion from the sale of its second renminbi-denominated or Panda bonds in China on May 15, the Finance Department said Thursday.

It said the three-year 2.5-billion-renminbi bonds were priced at 3.58 percent which allowed the government to achieve a tight spread of 32 basis points above the benchmark.  The bond float was held more than a year after the first issuance of 1.46 billion renminbi-denominated bonds which had a coupon of 5 percent in March 2018.

Finance Secretary Carlos Dominguez III said the success of the second ‘Panda’ bond float, which came on the heels of the similarly well-received float of Euro-denominated offshore securities, illustrated the high level of confidence of the international markets in the Philippines amid the game-changing reforms initiated by President Rodrigo Duterte to sustain the upward growth trajectory and attract more investments.

The Philippines successfully raised 750 million euros from the sale of eight-year global bonds which were priced at a coupon rate of 0.875 percent.

The government is tapping both the foreign and domestic debt markets to finance its widening budget deficit which is expected to represent 3.2 percent of the gross domestic product in 2019.

“Such confidence by the global investor community stems from our solid creditworthiness brought about by the government’s unwavering commitment to sound macroeconomic policies and fiscal discipline in the face of domestic and external challenges,” Dominguez said.

The order book reached a total of more than 11 billion renminbi, reinforcing a strong vote of confidence in the Philippine government’s economic stewardship and transformative reform agenda.

The Finance Department said that in terms of the geographical breakdown of investors, about 42.4 percent of the final allocation was placed to China’s onshore investors and 57.6 percent went to overseas investors. Major investors included commercial banks from China’s onshore and offshore markets. 

China Lianhe Credit Rating Co. Ltd. rated both the Philippines and this issuance as “AAA,” its highest rating. Aside from the local AAA rating, the Philippines has an international rating of Baa2/BBB+/BBB (Moody’s/S&P/Fitch).

National Treasurer Rosalia de Leon said the success of the Panda bond issuance, along with other recent issuances, resonated the positive market sentiment on Philippine credit.

“Through strategic and timely offerings, we are able to tap various markets even in a challenging environment that allowed for the Republic that resulted in more cost-efficient pricing,” she said.

Global credit watcher S&P Global Ratings upgraded the Philippines’ investment grade score to “BBB+” on April 30 from “BBB”, which means it is just a notch away from the much-coveted “A” category. The outlook was stable.

The upgrade put the Philippines at par with Mexico, Peru, Thailand and Trinidad, and Tobago. It is also higher than the “BBB” ratings of Italy, Portugal, Hungary, Panama, and Uruguay.

S&P said the country’s stable outlook reflected its assumption that the Philippine economy would continue to achieve above-average real GDP growth over the medium term, supporting the sovereign’s credit profile.

Economists said the upgrade would make the Philippines more attractive to foreign investors.

Topics: Panda bonds , Department of Finance , Carlos Dominguez III , Rodrigo Duterte
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