Philippines all set for maiden Panda bonds issuance Tuesday

March 19, 2018

The Philippine government is all set for the issuance of its inaugural 1.46 billion renminbi worth of renminbi-denominated bonds, or Panda bonds.

The Panda bonds, with a three-year tenor, will be issued in the onshore Chinese bond market on March 20, and settlement is on March 23.

"We are upbeat about this activity because of the significant interest from the market based on the inquiries and feedback we have received," National Treasurer Rosalia de Leon said.

The issuance follows an international deal roadshow by the Philippine delegation led by the National Treasurer, and Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo.

In the roadshow held from March 14-16, the delegation met potential investors in Singapore, Hong Kong, and China to expound on the terms of the bond issuance and to provide updates on the Philippine economy. The Philippine delegation's economic briefing received overwhelming participation particularly from onshore investors in Beijing.

The issuance will be taking advantage of the Bond Connect scheme, which allows offshore investors to participate. Demand from both onshore and offshore investors will allow the Republic to secure a favorable rate upon pricing date.

Backed by the Philippines' strong macroeconomic fundamentals, the bonds are rated "AAA" by China's Lianhe Credit Rating Co. Ltd. In the international market, the Philippines is currently rated "Baa2" by Moody's Investors Service, and "BBB" by Standard & Poor's and Fitch Ratings, all one notch higher than the minimum investment grade for sovereigns.

RMB proceeds of the bond issuance will be deposited with the BSP as part of its international reserves and converted to peso and deposited at the BSP. The proceeds will help fund government infrastructure projects and other financing requirements.

"The Panda bonds issuance is very timely given the sustained strengthening of the Philippines' credit profile, which is a result of long history of vital structural reforms. Investors have been encouraged to invest because the Philippines is one of the fastest growing economies in the region with a strong record in inflation management. Moreover, the country enjoys resilient external payments position, improving debt dynamics, and stable banking system," Guinigundo said.

De Leon and Guinigundo also cited during the roadshow the Philippines’ robust growth outlook over the medium term on the back of the government's massive infrastructure program, which comes amid continued observance of fiscal discipline. They also stressed the public spending program on human capital development to realize the country's demographic dividend from its young population.

The Philippines' maiden issue of Panda bonds affirms the country's improving bilateral relations with China and the increasing relevance of the renminbi. Last 2016, the International Monetary Fund (IMF) included the Renminbi in the Special Drawing Rights' (SDR) basket of currencies. DMS