Government targets $500 million from new bond issue

MANILA, Philippines —   The Marcos adminstration will borrow at least $500 million as it marks its second foray in the international debt market in a span of three months via the issuance of dollar and green bonds amid expectations of easing interest rates.

A notice of issuance stated that the Philippines plans to raise at least $500 million from foreign sources by offering global bonds with tenors of 5.5 and 10.5 years as well as a 25-year sustainability bond.

This marks the third global bond issuance of the Marcos administration since it assumed office. This is also the second for the year or since raising $2 billion last May.

Proceeds of both the 5.5 and 10.5-year bonds will be used for general budget financing while the green bond is set to refinance assets in line with the country’s sustainable finance framework.

Global bond issuances are a way to diversify the country’s funding sources and constantly provide liquidity of Philippine global bonds in the international market.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the latest dollar bond issuance was slated at a better timing to attract more global investors at lower borrowing costs for the government.

Ricafort said this is also amid the recent appreciating foreign exchange rate that would reduce debt servicing.

“Some investors also try to lock in interest rates before the Fed (US Federal Reserve) and other central bank rates go down further in the coming months,” Ricafort said.

The Fed is expected to pencil in a 25-basis-point rate cut next month and in November and a larger one in its last meeting by December.

On the domestic front, the Bangko Sentral ng Pilipinas slashed its key rates by 25 basis points last month, its first time to do so since November 2020.

The central bank said there is room for another rate cut this year as inflation continued its downtrend.

Ricafort said the recent favorable credit ratings of the Philippines could help reduce risk premium in terms of narrower spread over comparable US Treasury benchmarks.

New York-based Moody’s Investors Service assigned senior unsecured ratings of Baa2 to the dollar-denominated bond offerings of the government.

“The bonds to be issued under the shelf program will constitute direct, unconditional and unsubordinated obligations of the government of the Philippines,” Moody’s said.

It added that the bonds would rank pari passu or on equal footing with all of the country’s current and future senior unsecured external debt obligations.

The rating also mirrors the credit rating of Baa2 held by the Philippines.

S&P Global Ratings assigned BBB+ long-term foreign currency issue rating to the benchmark-sized senior unsecured bonds while Fitch Ratings assigned a BBB.