By Beatrice M. Laforga, Reporter
The government is looking to return to the Japanese and US bond markets later this year to raise up to $2.35 billion, documents from the Budget department showed.
Citing data from the National Treasury, the latest Budget of Expenditures and Sources of Financing (BESF) report showed there are two proposed offshore bond issuances for the rest of 2020 — $1.35 billion in yen-denominated bonds or the so-called “samurai bonds;” and $1 billion in dollar global bonds to be offered in the fourth quarter.
The Treasury aims to raise $6 billion (P289.73 billion) from the offshore market for the entire year. In the first half, it already raised $3.55 billion (P170 billion) from the sale of dollar- and euro-denominated global bonds, leaving a balance of $2.45 billion (P120 billion) left.
“We are still watching market developments and take cognizance of the Fed (US Federal Reserve) decision,” National Treasurer Rosalia V. de Leon said in a Viber message Friday.
Reuters reported the Fed announced a new strategy last week that is more supportive of the US labor market and its adoption of a “loose form of average inflation targeting.”
If the proposed issuances will push through, this will be the second time the Philippines will tap the dollar bond market this year after its issuance in May when it borrowed $1 billion in 10-year notes and $1.35 billion in 25-year papers.
The last time it offered the “samurai bonds” was in August 2019 when it sold ¥92 billion across four tenors: ¥30.4 billion in three-year bonds, ¥21 billion in five-year papers, ¥17.9 billion in seven-year instruments and ¥22.7 billion in 10-year notes.
The Philippines’ first offshore issuance this year was through the euro-denominated bonds, raising €600 million in nine-year bonds and another €600 million in three-year debt.
In a note on Friday, the Asean +3 Macroeconomic Research Office (AMRO) said the widening deficit and announcement of an increased borrowing plan next year could push up the rates of government bonds in the local market.
“A risk worth flagging is the widening fiscal deficit and a sizable issuance plan for 2021. Bond yields may rise as investors position themselves ahead of the increase in supply,” the report read.
However, it said the Treasury’s move to reject the bids on the 20-year Treasury bonds (T-bonds) offered last week was a “positive sign” that the government is not giving in to the urgent need of raising funds and is willing to wait for reasonable rates before issuing bonds.
The government plans to raise P3 trillion this year, 74% of which will be sourced locally while the balance will be coming from foreign lenders.
This will be used to plug its funding gap seen to hit 9.6% of gross domestic product (GDP) this year.
Gross borrowings reached P1.7 trillion in the first half.
For next year, global bond issuances are estimated to reach $6 billion (P290 billion), similar to the program this year.
The government plans to borrow another P3 trillion next year, 85% from the domestic market and the rest offshore, to fund its increased P4.506-trillion spending plan and plug the fiscal gap projected to teach 8.5% of GDP.