PHL raises $1.26 billion from retail dollar bonds

THE PHILIPPINE government raised $1.26 billion from the first retail dollar bond (RDB) offering under the Marcos administration, the Department of Finance (DoF) said.

“So, we upsized (the offer) from $1 billion to $1.26 billion and now it’s closed,” Finance Secretary Benjamin E. Diokno said in mixed English and Filipino during a press briefing on Friday.

This was much higher than the minimum issue size of $200 million but below the $1.6 billion raised at the maiden retail dollar bond auction in 2021, under the administration of then-President Rodrigo R. Duterte.

“I think this is a very good turnout considering the current market conditions. And the fact that we were able to upsize from the initial target of $1 billion is actually a very good signal,” Deputy Treasurer Erwin D. Sta. Ana said.

Mr. Diokno said there was a “little bit of a premium” because the government wanted to encourage more overseas Filipino workers (OFW) to invest.

The dollar-denominated five-and-a-half-year bonds fetched a coupon rate of 5.75% and were awarded at rates ranging from 5% to 5.75%, bringing the average to 5.509%.

The coupon was 437.5 basis points (bps) higher than the 1.375% rate of the five-year retail dollar bonds and 350 bps higher than the 2.25% set for the 10-year bonds offered in 2021.

Mr. Sta Ana said that demand for the bonds reached $1.28 billion but the Treasury did not make a full award as it did not accept tenders that went beyond the coupon rate.

“In the auction, we have a cut-off rate. It’s a Dutch auction, so the moment that you cut it at that rate, there goes the corresponding volume,” he said in mixed English and Filipino.

“We did not entertain a higher yield because the other excess demand would actually be beyond the 5.75% coupon. But we priced it at 5.75%, so anything that goes within that volume would be accepted. It was the excess that we did not accept,” he added.

Mr. Sta Ana also noted that the BTr will be able to determine the number of retail investors on the issue date (Oct. 11).

In the last RDB, around 9% of the buyers were retail investors.

The offer period for the retail dollar bonds ran from Sept. 27 to Oct. 6, while the settlement is on Oct. 11 (Wednesday).

The bonds will mature on April 11, 2029 and are also payable every quarter until its maturity.

The government is also planning to launch Sukuk bonds by end-November.   

It is targeting to raise around $1 billion from the Islamic bonds, which will have a minimum denomination of at least $200,000.

This year, the government plans to borrow P2.207 trillion, consisting of P1.654 trillion from domestic and P553.5 billion from foreign sources. — Luisa Maria Jacinta C. Jocson