PHL rules out tapping global bond market

By Beatrice M. Laforga
Reporter

THE government probably won’t tap global bond markets to fund its anti-coronavirus disease 2019 (COVID-19) response, National Treasurer Rosalia V. de Leon said on Thursday, citing ample liquidity supply in the local market.

The Philippines also can explore other options if there was a need to increase spending, she told reporters in a Viber message.

“There’s no need at this time,” Ms. De Leon said. “The Bangko Sentral ng Pilipinas got us covered,” she added, referring to the central bank’s recent purchase of P300 billion of government securities.

The Treasury bureau can also make use of a “switch” program, where bondholders can exchange their holdings for the latest debt paper being offered, Ms. De Leon said.

She said there was “strong domestic bid,” citing banks’ foreign currency deposit unit loans that rose by 1.2% from June last year to $18 million as of yearend.

“Conditions today call for unconventional responses,” the Treasury chief said. “This is not your usual playlist. We continue to look for opportunities as we saw that issues like Israel or Panama get printed.”

Israel on Wednesday sold $1 billion of 100-year bonds at 4.5% coupon in the global market, joining countries such as Austria, Mexico and Argentina to issue so-called century bonds, Reuters reported.

Israel also sold $2 billion of 10-year debt paper at a coupon of 2.75% and another $2 billion 30-year debt at 3.875% as part of its government’s $22-billion package to boost its economy amid the health crisis.

Back home, the national Treasury raised P300 billion from the sale of three-month government securities to the Philippine central bank, payable in six months interest-free.

The sale added to the government’s funding pool “with the least cost,” on top of P100 billion in dividends it expects from state-owned companies, according to Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

“As a result of this huge source of cash at zero interest rate, the Treasury bureau already signaled that the National Government does not need to raise funds through the sale of foreign bonds at the moment,” he said in an e-mailed reply to questions.

This would cut the country’s reliance on foreign commercial borrowings and minimize foreign exchange risks and volatility, Mr. Ricafort said.

President Rodrigo R. Duterte’s plan to realign about P275 billion from the 2020 national budget would also rule out additional borrowings, he added.

Ms. De Leon earlier cited the need to change the country’s borrowing mix, now at 75:25 in favor of domestic sources, as the government taps additional funding from multilateral agencies worth up to $2 billion to fund its anti-COVID-19 efforts.

Mr. Ricafort said such sources of financing are “prudent’ and could result in savings for the National Government.

The Treasury bureau had rejected bids in the past four consecutive auctions after players asked for higher rates.

The Budget department said in a statement yesterday it had released P100 billion to the Social Welfare department, the first tranche of the P200-billion program that will give P5,000 to P8,000 of aid to 18 million low-income families in the next two months.