Treasurer signals euro bond sale within the month

THE COUNTRY’s planned benchmark-sized euro-denominated notes will likely be offered “very very soon,” the head of the Bureau of the Treasury told reporters in Malacañan Palace on Wednesday, saying the government is still watching market developments for the right time to sell the debt papers.

“We are just watching closely market developments and very soon we may be able to launch the euro bond issue,” National Treasurer Rosalia V. De Leon said in the press conference, adding later with a smile when pressed for a definite timetable that the sale will be conducted “very very soon.”

Asked if the euro bonds will be sold next month, Ms. De Leon replied: “Masyadong matagal ‘yan (That’s too long a wait).”

The government plans to issue “benchmark-sized” euro-denominated bonds — meaning at least $500 million (€446.94 million) in volume — in order to diversify funding sources.

The Philippines hired banks late last month to arrange deal road shows in Zurich, London, Paris, Frankfurt and Milan from April 26 to draw investor interest.

“Based on the road show that we conducted, they are very receptive. They have been looking forward for the RoP (Republic of the Philippines) to come back to the market…” Ms. De Leon said.

On Monday, she said the Treasury is looking at issuing the notes with maturity in the “intermediate part of the curve.”

“During discussions with investors, that’s also their preference, so between seven to 10 years,” she said following the weekly Treasury bills auction in Manila City.

Fitch Ratings and S&P Global Ratings assigned a “BBB” rating while Moody’s Investors Service assigned “Baa2” to the planned debt notes two weeks ago, all a notch above minimum investment grade.

On April 30, S&P raised the country’s long-term sovereign credit rating to “BBB+” from “BBB,” bringing it a step closer to bagging a single “A” grade.

Deputy Treasurer Erwin D. Sta. Ana said late last month that the government has been “planning to go back to the euro market for the longest time,” explaining that “[t]his is part of the DoF (Department of Finance) and Treasury’s strategy to diversify its financial instruments and… investors base.”

The last time the government borrowed euros was in 2010, raising €75 million in three- and five-year multi-currency retail Treasury bonds that also raised $400 million.

It also raised €500 million in 10-year debt in 2006 in a multi-currency global bond offer along with $1.5 billion.

The state plans to borrow P1.189 trillion this year — 75% of which will be sourced domestically while the remainder will be from foreign creditors — to fund a budget deficit programmed at P624.4 trillion, equivalent to 3.2% of gross domestic product, and support increased government spending programmed at P3.774 trillion.

The state is also set to raise 6 billion yuan ($893.3 million) from a second sale of “panda” bonds. For the planned yuan-denominated debt, Ms. De Leon said the government is also waiting for the right market conditions before selling. “We have also received the approval of the regulators. Same, we are looking closely,” she told reporters on Wednesday.

The government is also looking at offering “samurai” bonds amounting to $1-1.5 billion in yen equivalent some time next semester, as well as another round of offshore dollar bonds.

In January, the Philippines sold $1.5 billion in 10-year offshore dollar bonds, priced 110 basis points (bps) above benchmark US treasuries and tighter than an initial 130 bps guidance. — Karl Angelo N. Vidal