Gov’t sells $500-M dollar bonds

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The transaction follows the country's P30.8 billion ($750 million) global peso bond offer on November 9

MANILA, Philippines (UPDATED) – The government saw strong demand for its $500-million dollar bond offer to local investors on Wednesday, November 28.

The 10.5-year onshore dollar bonds fetched a coupon rate of 2.75%.

The issue was more than 3 times oversubscribed, with total tenders reaching $1.742 billion.

Newly appointed National Treasurer Rosalia De Leon welcomed the positive investor response.

“Investors are seeing the government’s good economic management,” De Leon said.

Proceeds of the dollar bond sale would be used for various requirements such the government’s regular budgetary needs, and loans for the Power Sector Assets and Liabilities Management Corp. (PSALM).

PSALM, the agency tasked to manage the government’s power assets, needs P60 billion to refinance existing debt and to fund budgetary operations next year.

The bond transaction follows the country’s P30.8 billion ($750 million) global peso bond offer on November 9. Proceeds from the global peso bonds were used to buy back expensive foreign debt.

The issuance of peso-denominated debt and buyback were part of the government’s debt liability management efforts.

Since the start of the Aquino administration, fiscal authorities have been trying to reduce the foreign component of the government’s debt to protect the economy from foreign exchange fluctuations.

The government programmed to borrow $4.02 billion from external sources this year, lower than the $4.5 billion set last year.
Of the $4.02 billion, the government programmed to raise $2.25 billion from the commercial debt market, $1.77 billion from program and project loans.

 The government borrows to fund its budget requirements.

It expects this year’s budget deficit to reach roughly P279 billion or 2.6% of the economy’s output, from the P197.8 billion incurred last year or 2% of gross domestic product. –

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