THE PHILIPPINES will issue today its maiden renminbi-denominated “panda” bonds, the government announced on Monday.
“The Philippine government is all set for the issuance of its inaugural RMB 1.46 billion worth of renminbi-denominated bonds, or Panda bonds,” the government’s Investor Relations Office (IRO) said in a statement.
“The panda bonds, with a three-year tenor, will be issued in the onshore Chinese bond market on March 20, and settlement is on March 23.”
The sale follows a Philippine a road show in Singapore, Hong Kong and China on March 14-16, led by National Treasurer Rosalia V. de Leon and Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo.
“We are upbeat about this activity because of the significant interest from the market, based on the inquiries and feedback we have received,” Ms. de Leon was quoted in the statement as saying.
The same statement quoted Mr. Guinigundo as describing the exercise as “very timely given the sustained strengthening of the Philippines’ credit profile, which is a result of long history of vital structural reforms.”
“Investors have been encouraged to invest because the Philippines is one of the fastest growing economies in the region with a strong record in inflation management,” Mr. Guinigundo noted.
“Moreover, the country enjoys resilient external payments position, improving debt dynamics and stable banking system.”
The IRO said that the road show saw “overwhelming participation” especially by investors in Beijing.
“The issuance will be taking advantage of the Bond Connect scheme, which allows offshore investors to participate. Demand from both onshore and offshore investors will allow the Republic to secure a favorable rate upon pricing date,” the statement read.
China-based debt watcher Lianhe Credit Rating Co. Ltd gave the yuan-denominated bonds an “AAA” top rating and stable outlook, noting the debt has the “lowest expectation of default risk.”
Proceeds of the debt sale will be converted into peso, to be deposited with the BSP, and will help fund the government’ infrastructure projects and other financing requirements.
The government plans to spend some P8 trillion up to 2022, when President Rodrigo R. Duterte ends his six-year term, in a bid to boost gross domestic product (GDP) growth to 7-8% up to then from 2017’s 6.7% and a 6.3% average in 2010-2016.
The government has programmed a P888.23-billion borrowing plan this year to fund its budget deficit that is capped at three percent of GDP. Of this amount, P176.27 billion will be sourced externally while P711.96 billion will be borrowed locally.
The government said that the renminbi-denominated debt sale affirms the country’s “improving bilateral relations” with China and the increasing relevance of its currency.
A trader said that the maiden panda bond sale would broaden the government’s investor base.
“We are investment-grade so the demand would be good,” he said in a phone interview yesterday. “This would broaden the investor portfolio on the part of the government. It will have a wider investor base. Also it would be in favor for the government given the renminbi is one of the most active currencies in the global market.”
Another trader sought for comment said that “[g]iven that interest rates are not yet on the high side — we’re still expecting global central banks to hike interest rates… so it’s an opportune time for the government to have fixed securities offshore.” — Elijah Joseph C. Tubayan