Strong demand for peso bond swap THE PHILIPPINES’ new 2020 and 2035 bonds under a debt swap and sale program attracted solid investor demand, with orders reaching over P200 billion at the end of the offer on Friday, the Bureau of the Treasury said on Friday last week. As part of the offer, the government will also raise fresh cash by selling new 2035 bonds to buy back some local debt on issue, but no new money would go the state coffers after the transactions. The government got offers of around P150 billion for its new 2035 bonds and around P50 billion for the 2020 bonds under the debt swap program, National Treasurer Roberto B. Tan said. It also received bids of more than P20 billion for new 2035 bonds under the cash sale component of the debt issue. "We are very, very satisfied," Mr. Tan told Reuters. "This is a testimony of investor confidence in the country’s sound economic fundamentals." In a text to reporters, Mr. Tan attributed the big demand to a "very positive outlook on the Philippine economy." The government had set the minimum coupon rate at 5.875% for the 2020 bonds and 8.125% for the 2035 bond. On Friday, existing 10-year bonds were quoted at 5.82%, nearly flat from 5.80% the previous day. Yields on the 25-year bonds were at 8.25%, steady from Thursday. Demand surpassed the previous bond exchange in Jan. 2009, when P144.5 billion of five-year and seven-year bonds were issued. The offer period for the government’s bond swap program ended on Friday. The coupon rate for the new bonds will be announced on Dec. 14 and settlement is on Dec. 16. First Metro Investment Corp. (FMIC), HSBC, BPI Capital Corp and state-run Land Bank of the Philippines were joint dealer managers and arrangers of the domestic swap. The swap would help establish a benchmark for long-term financing as the government tries to entice private investors to partner with it on much-needed infrastructure projects to help boost economic growth. FMIC Executive Vice-President Juanchito T. Dispo said via text that "bulk of the bids were for the 25-year bond." "Investors expect that a critical mass will be created from the exchange and it will spur active trading for the 25-year paper, as this will eventually become the most active benchmark," Mr. Dispo said. Mr. Tan said the government would like to issue 25-year bonds on a regular basis. "We will consider 25-year bonds for the next auctions," he said. A trader said by phone that "the high minimum coupon rate triggered the market to go after the 25-year bond," adding "the news of the Treasury to sell 25-year debt papers quarterly next year also triggered demand for the 25-year bonds." -- main report by Reuters |
| Stocks: Week ahead will test the bulls NEW YORK (CNNMoney.com) -- There's a growing sense of optimism on Wall Street about the economy, but this week's busy calendar could test the bull's resolve. Stocks drifted higher last week, with the S&P 500 reaching its highest level since September 2008, while the Nasdaq closed at its highest point since December 2007. The Dow Jones industrial average ended the week little changed. The market has been supported by increasing signs that the recovery is gaining some momentum. Earlier this month, economists at Goldman Sachs (GS, Fortune 500) raised their 2011 forecast for inflation-adjusted U.S. growth to 2.7% from 1.9%, based on gradual improvement in demand. "The market has been doing pretty well," said Alec Young, equity strategist at Standard & Poor's. "The recovery continues nice and steady in the U.S. and the market looks like it could go higher if that stays intact." And 'if' is the key word. Investors will have several economic reports to chew on this week, including readings on inflation, retail sales and new home construction. It's not just the U.S. economy on investors' minds. Europe continues to suffer from debt problems in certain countries, while a report over the weekend showed Chinese inflation continues to rise.
"The tax debate is a big question mark right now," said Dan Greenhaus, chief market strategist with Miller, Taback & Co. There is also speculation that the Fed may scale back its plan to buy $600 billion worth of U.S. Treasuries, he said.
"If they reiterate their commitment to asset purchases, that would be encouraging for the equity market," Greenhaus said, referring to Fed policymakers. Treasury yields spiked last week as investors ditched the safety of U.S. debt. Traders said they will also continue to watch the U.S. dollar, which has been gaining ground in the currency market. A stronger dollar typically weighs on prices for certain commodities and can drive down stocks in the industrial sector. On the docket Monday: There are no market-moving economic or corporate events expected on Monday. Tuesday: Government reports on retail sales and inflation at the wholesale level come out before the market opens. Economists expect U.S. retail sales to have risen 0.8% in November, according to consensus estimates from Briefing.com. Sales jumped 1.2% rise in October. Excluding the automotive sector, sales are forecast to edged up 0.6% in the month. The producer price index for November is expected to gain 0.5%, following a 0.4% increase the month before. Core PPI, which excludes food and energy prices, is forecast to rise 0.3%, following a dip in October. After the market opens, another report is expected to show business inventories grew 0.6% in October. On the corporate front, BestBuy (BBY, Fortune 500) is scheduled to release quarterly results before the market opens, while homebuilder Hovnanian (HOV) reports after the bell. The Federal Reserve's policy statement is due in the afternoon. The central bank is widely expected to hold interest rates near 0%, where they have been since the financial crisis took hold in 2008. Other economic reports on tap before the market opens are the empire manufacturing survey and government data on industrial production and capacity utilization. Thursday: The government's weekly report on initial claims for jobless benefits is expected to show a modest uptick to 425,000 from 421,000 in the prior week. On the housing front, government figures are expected to show that initial construction of single family homes and requests for building permits both rose in November. Housing starts are forecast to have risen to an annual rate of 545,000 from 419,000, while permits are forecast to climb to 570,000 from 550,000 in October. FedEx (FDX, Fortune 500) and General Mills (GIS, Fortune 500) are among the companies scheduled to report quarterly results early Thursday. BlackBerry maker Research In Motion (RIMM) is on deck after the market closes. Friday: An index on leading economic indicators for November is expected to increase 1.2%, after a 0.5% rise the month before. |
Oil Drops as China Orders Banks to Increase Reserves on Inflation Concern Crude oil fell after China took steps to counter inflation, potentially slowing economic growth and fuel demand in the world’s biggest energy-consuming country. Prices slipped 0.7 percent after the People’s Bank of China required lenders to increase financial reserves by 50 basis points starting Dec. 20. Oil rose earlier as China said November crude imports jumped 26 percent and the International Energy Agency boosted its 2011 oil-demand forecast for a third month. “The increase in reserve requirements is probably the first shot across the bow,” said Phil Flynn, a Chicago-based analyst and trader with investment adviser PFGBest. “The market is concerned that the Chinese will follow this move with an interest-rate increase over the weekend.” Crude oil for January delivery declined 58 cents to $87.79 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 1. Futures dropped 1.6 percent this week and are up 24 percent from a year ago. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
Jonathan Ravelas
Chief Market Strategist
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Rhys Cruz
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