Government looks to tap euro bond market

To complete H2 offshore borrowings

MANILA, Philippines — The Marcos administration is looking at the euro bond market for the first time to complement other foreign-denominated offerings in hopes of more favorable interest rates in the second semester.

On the sidelines of the Philippine Life Insurance Association’s 74th anniversary Tuesday evening, Finance Secretary Ralph Recto said the government may turn to euro-denominated securities, commonly known as euro bonds.

This developed as the Bureau of the Treasury has started to prepare for the remaining $3 billion in global bond issuances as part of the government’s fundraising program.

“The process has started because I signed (the paperwork) already. But it doesn’t mean it will happen right away. There’s a procedure to follow,” Recto told reporters.

“We plan on dollar, euro and yen because we want to diversify. But the final decision will be made by the Treasury,” he said.

For 2024, the government targets to raise a total of $5 billion in global bond issuances. It has so far borrowed $2 billion via a dual-tranche global bond issuance in May.

If the euro bond pushes through, this will be the first euro bond issuance to be undertaken by the Marcos administration.

The Philippines last borrowed via the European currency in April 2021.

At the time, the country raised 2.1 billion euros (P121.97 billion) through a multi-tranche issuance with tenors of four, 12 and 20 years, with coupons ranging from 0.25 to 1.75 percent.

Recto said the government remains keen on yen-denominated securities or samurai bonds, which were floated last June.

“We are looking at around $500 million for samurai. But it’s going to be the last to be issued for the year, I think,” Recto said.

For now, the Treasury is waiting for global interest rates to finally ease before proceeding with the issuances.

“The optimum time is when we can get lower rates so we can have the cheapest borrowing cost,” Recto said.

The US Federal Reserve is expected to keep its two-decade-high interest rates on hold this week, with the earliest possibility of a policy easing only by September.

On the domestic front, economists said the Bangko Sentral ng Pilipinas may still proceed with its planned rate cut this August even after a projected uptick in consumer prices following the onslaught of Typhoon Carina.

Amid the planned borrowings and the country’s outstanding debt reaching P16.06 trillion by yearend and further increasing to P17.35 trillion by end-2025, Recto maintained that the high debt level is nothing to worry about.

“Expect the debt to continuously increase. And so the economy will continuously grow as well and our ability to pay will also improve,” Recto said.

“There’s nothing to worry about. And like I said, two-thirds of that, we owe to ourselves; only one-third is foreign,” he said.