Philippines eyes samurai bond issue in Q3

MANILA, Philippines — The Philippines is still keen on issuing samurai bonds by the end of the third quarter or early in the fourth quarter, as well as panda bonds next year despite the possibility of higher interest rates.

Finance Secretary Carlos Dominguez said the government is set to proceed with the planned yen-denominated debt issuance either in September or October.

“So again, we are planning on it. So far there is no indication on why we should not, we will still go ahead with the samurai. Because the Japanese calendar is different, it should be around September or October,” he said.

In Japan, the government’s financial year is from April 1 to March 31.

Dominguez said the government has yet to finalize the size of the planned samurai bond sale in Japan.

The government intends to use the proceeds of the planned offshore fund raising activity to cover the redevelopment of a prime property in Nanpeidai, Shibuya district in Japan as planned by the Department of Foreign Affairs (DFA) and to settle maturing yen-denominated loans.

“Again (the amount) is not yet determined. But for one we have about $100 million we can use because the DFA is planning to invest in Japan to build up the embassy and develop the property there,” Dominguez said.

The Philippine government is looking at redeveloping a 2,600 square meter Shibuya property for the planned chancery and apartment complex of the staff of the Philippine Embassy in Japan.

The Philippines last issued samurai bonds worth 100 billion yen in February 2010.

National Treasurer Rosalia de Leon had said the Philippines may issue a benchmark size of about $500 million to $750 million in samurai bonds, part of which would be used to redevelop the Nanpeidai property in Japan.

Deputy Treasurer Erwin Sta. Ana hopes to pursue the issuance of panda bonds next year as the government intends to tap the renminbi market as one of its regular financing sources.

“We are continuing to study the market because of the success of the last issuance where we got the tightest pricing possible. So we could also consider, but not within the year,” Sta. Ana said.

The Philippines raised 1.46 billion renminbi or about $230 million from the issuance of panda bonds in March.

The country borrows from foreign and domestic sources to finance its budget shortfall as it continues to spend more than what it raises. It has committed to maintain a budget deficit at three percent of gross domestic product amid the massive infrastructure build up.

Rising global interest rates result in lower bond prices and higher bond yields as central banks led by the US Federal Reserve continue raising benchmark rates.

Dominguez for one cited the 10-year US treasury which breached the three percent level due to the possibility of a faster than expected interest rate hikes by the US Fed.

“We believe US interest rates are going up, and believe me it is going faster than we anticipate,” he said.