Philippine Markets: 22 March 2011

22 March 2011

USD/PhP: 43.39 (as of 12:00pm) PSEi: 3854.14 + 9.83
USD/JPY: 80.97 PFINC: 865.49 + 7.54
EUR/USD: 1.4220 BDO: 50.00 + 1.40
GBP/USD: 1.6302 BPI: 53.70 unch
PDSTF3M: 1.5212 MBT: 62.00 + 0.15
Prices as of 12:00pm Source: Bloomberg, Reuters



Philippines Sells $1.5 Billion of Bonds to Fund Deficit

By Clarissa Batino and Max Estayo
March 22 (Bloomberg) -- The Philippines sold $1.5 billion
of 15-year dollar debt, completing its target for global sales
to help cover this year’s budget deficit.
The government sold the 5.50 percent bonds due March 2026
at a yield of 5.55 percent, the finance department said in an e-
mail. That was below the 5.625 percent guidance announced
yesterday. Thirty percent of the securities were sold in the
U.S., 30 percent in Europe, 22 percent in the Philippines and 18
percent in the rest of Asia. Bids totaled $6.5 billion, or 6.5
times the amount on offer, Finance Secretary Cesar Purisima said
in a mobile-phone message today.
“There’s a relatively low level of supply and strong
demand for these bonds from local onshore institutions,” said
Sergey Dergachev, who helps oversee about $9.6 billion of
emerging-market debt at Union Investment Privatfonds GMBH in
Frankfurt.
Emerging-market companies and governments have sold $181
billion of bonds so far this quarter, the busiest start to a
year since Bloomberg began compiling such data in 1999. The
Philippines’ issuance brings overseas debt sales to $2.75
billion this year, exceeding the $2.5 billion originally
planned. It will help fund a budget deficit the government
estimates will narrow to 300 billion pesos ($6.9 billion) from
314.4 billion pesos last year.

Bond Yields, Peso

Five-year peso bonds gained the most in two months. The
rate on the 7 percent peso notes due January 2016 dropped 18
basis points to 5.82 percent, according to Tradition Financial
Services. The yield on the new bonds was little changed as of
9:54 a.m. in Manila, according to prices from ING Groep NV.
The dollar bonds were sold at a spread of 223.8 basis points
over U.S. Treasuries, according to a person familiar with the
matter who asked not to be identified because the details have
yet to be made public.
The extra yield investors demand to own Philippine dollar
bonds instead of Treasuries narrowed two basis points, or 0.02
percentage point, to 170 in New York. The spread reached 184 on
March 16, the widest level since Oct. 8, according to JPMorgan
Chase & Co.’s EMBI+ Philippines Sovereign Spread Index.
The peso strengthened 0.4 percent to 43.388 per dollar as
of 10:01 a.m. in Manila, the strongest level since March 10,
according to Tullett Prebon Plc.
“The Philippines moved swiftly to access the U.S. dollar
bond market and achieve low-cost, long-dated offshore funding,”
Purisima said. “This continues the Republic’s pro-active stance
in managing its sovereign debt, extending its debt maturity
profile during uncertain times for the global economy.”

Growth Target

The Philippine economy expanded 7.3 percent last year, the
most in 34 years, and President Benigno Aquino is targeting
growth of 8 percent this year. Moody’s Investors Service raised
its outlook on the nation’s debt rating in January to positive
from stable. Policy makers are studying the impact of the crisis
in Japan, the nation’s biggest trading partner and largest
source of development loans, Aquino said yesterday.
Treasurer Roberto Tan has said the latest issuance may be
the nation’s final overseas debt sale for the year. The
government’s official development loans from overseas may face
delays, Tan said. Risks arising from Japan’s earthquake may
delay an offering of yen bonds from the first half of this year,
Ricky Carandang, a presidential spokesman, said last week.
Goldman Sachs Group Inc. and HSBC Holdings Plc were lead
arrangers for the latest issue. Citigroup Inc., Deutsche Bank
AG, JPMorgan Chase & Co. and UBS AG also helped sell the notes,
the government said.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001