Philippines Panda bonds warmly received by Chinese, offshore markets: DOF

March 20, 2018

With a tight spread of 35 basis points above benchmark, the Philippines' three-year Panda bonds fetched a coupon rate of 5 percent, in what the country’s top finance official consider as a reflection of confidence in the robust growth prospects and creditworthiness of the country.

The Philippine government’s inaugural issue of renminbi-denominated bonds, or Panda bonds, was warmly received by the Chinese and other offshore markets with oversubscription hitting about 6.32 times, the all-time largest coverage for any Panda sovereign issuer, according to the Department of Finance (DOF) Tuesday.

Bids reached RMB 9.22 billion compared with the Philippine government’s debt offering of RMB 1.46 billion. .

With the bond connect scheme, offshore investors comprised 87.7 percent of allocation, representing the highest offshore mix for any Panda issuer.

The price range of 5.00 – 5.60 percent was announced on March 19 and demand was able to push the coupon to 5. percent

“The Philippine government’s successful inaugural issuance of Panda bonds highlights the investor confidence that the country enjoys on the back of its strong credit profile,” Finance Secretary Carlos Dominguez III said.

“This is also one of the concrete results of President Duterte's independent foreign policy,” he added.

Relative to the government’s usual global dollar issuance, the renminbi-denominated Panda bond’s 5.00 percent coupon would have an indicative dollar swap equivalent rate of 2.93 percent, 23 bps below current three-year dollar yield of 3.16 percent.

The Panda bonds were rated “AAA” by China's Lianhe Credit Rating Co. Ltd.

The bonds issuance on March 20 followed a three-leg, international deal roadshow by the Philippine delegation led by National Treasurer Rosalia de Leon and Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo.

The bond issuance came amid the consistently strong performance of the Philippine economy in nearly twenty years, making it one of the fastest growing economies in Asia. The Philippines grew by 6.7 percent in 2017 after expanding by 6.9 percent the previous year.

The Philippines’ outlook remains robust, with the government expecting growth to hit the official target range of 7 to 8 percent this year until 2022.

Bank of China served as lead underwriter of the bond issuance, and Standard Chartered Bank as joint lead underwriter. Beyond the Panda bond issuance, Bank of China has supported the Philippines in several initiatives, including the development of the Renminbi spot market in the Philippines. DMS