April 21, 2024


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PH plans to borrow $1B more through dollar bonds as COVID-19 eating up funds

3 min read

The Philippines is selling at least $1 billion in 10- and 25-year US dollar-denominated global bonds to foreign investors while awarding P24 billion in treasury bills on Monday (April 27) amid strong demand and declining rates.

The Bureau of the Treasury again sold more than its P20 billion in T-bill offering.

Average rates declined to 2.617 percent for three-month debt papers from 3.113 percent last week. They fell to 2.831 percent for six-month IOUs from 3.239 percent previously. One-year securities carried 3.054 percent interest from 3.295 percent.

Tenders across the three tenors, or maturity periods, reached P91.154 billion, making the auction more than 4.5 times oversubscribed.

This prompted the Treasury to open its tap facility window to sell another P10 billion in 364-day T-bills through 11 government-licensed IOU vendors.

National Treasurer Rosalia V. de Leon said that the market was “flushed with liquidity.”

Rates dropped following “reassuring” statements from Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, who last Saturday (April 25) said the BSP still has space for policy rate adjustments and would use its entire arsenal to keep the Philippine economy from collapsing under the weight of the COVID-19 lockdown.

The Philippine gross domestic product (GDP) was projected to contract as a result of the pandemic.

De Leon said investors were bullish because of recent official development assistance (ODA) inflows augmenting the national government’s resources in the fight against COVID-19.

Last week, the Washington-based World Bank approved a $100-million loan for the Department of Health’s (DOH) COVID-19 response, while the Manila-based Asian Development Bank (ADB) approved $1.5 billion in loans for budgetary support for programs and projects to fight the disease.

The government planned to borrow P310 billion more from foreign lenders to augment COVID-19 funds, on top of the programmed record-high P1.4-trilion borrowing under the 2020 budget to finance a projected wider budget deficit of P990.1 billion, equivalent to 5.3 percent of GDP.

Last month, Cabinet-level Development Budget Coordination Committee (DBCC), via ad referendum, projected total tax and non-tax revenues this year to reach P3.173 trillion, just slightly up from P3.138 trillion in actual collections last year, Budget Undersecretary Laura B. Pascua said.

Expenditures on public goods and services this year were expected to jump to P4.163 trillion from P3.798 trillion last year, Pascua added.

Also, De Leon said that the Philippines’ announcement on Monday of issuing dollar-denominated debt papers buoyed domestic demand for T-bills. She, however, declined to elaborate on the global bond offering.

According to wire reports, the Philippines was eyeing benchmark sizes of $500-700 million each for the two tenors.

The joint book runners were Citigroup, Credit Suisse, Goldman Sachs (Asia) LLC, Morgan Stanley, Standard Chartered Bank, and UBS.

Proceeds of this bond sale will finance the government budget.

Finance Secretary Carlos G. Dominguez III had said that commercial borrowings will be next in line as COVID-19 response funding sources once cheaper ODA from multilateral lenders and bilateral development partners were exhausted.

Edited by TSB

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