More private firms seen going into global peso bonds

MANILA, Philippines - Finance Secretary Cesar Purisima sees a number of private companies issuing peso-denominated global bonds now that the government has started creating a market for it.

In an interview with The STAR, Purisima said local borrowers could now tap long-term funding via global peso bonds which would help cushion them from the impact of foreign

currency fluctuations. “I believe that we are opening doors for local players also.

When I issue the 25-year paper, local borrowers can now borrow in pesos for 25 years. Before, that’s not available,” Purisima said. Following the successful launch of the government’s recent 25-year peso-denominated global bonds, Purisima now expects

the private sector to follow. He said industry players would realize that it is practical to borrow in peso because there is a market for it and that their costs of borrowing would be in accordance with a fixed peso-dollar exchange rate.

The effect of this is that borrowers are cushioned from the impact of foreign exchange fluctuations in contrast with the dollar-denominated global bonds.

Last week, the Aquino administration has borrowed anew, raising $1.25 billion or P54.77 billion through the sale of 25-year peso-denominated global bonds, marking the government’s first fund-raising activity in the foreign market for the year.

The bonds are peso-denominated but will be settled offshore and payable in US dollars. The conversion rate for the bonds at pricing was P43.777 to $1.

Proceeds of the bond sale would be used for its budgetary operations and refinancing needs.

The government is eyeing to contain the budget deficit at P290 billion this year and hopes to have kept the budget gap at P325 billion last year. This is the second peso-denominated global bond sale of the Aquino administration, having successfully sold $1 billion in global peso bonds in September last year.