Capital Markets | Sovereign Debt

Author: Gordon Platt

The Philippines sold $2 billion of 25-year bonds in January, in a highly successful sale that attracted $13.5 billion in orders. The country, which achieved investment-grade status in late 2013, sold the dollar-denominated bonds at a record-low coupon of 3.95%, or 142 basis points over similar-maturity US Treasuries.

Moody’s Investors Service says the Philippine government rating of Baa2 is supported by improvements in government finances, with ongoing debt reduction. “The country has favorable prospects for strong economic growth, and as a net oil importer, stands to benefit from a prolonged period of lower oil prices via lower inflation and a compression of its import bill,” Moody’s says.

The Philippines’ foreign exchange reserves exceed its external debt, and its current account is supported by remittance inflows from overseas workers and service exports, particularly from business process outsourcing, the rating agency says.

Simultaneously with the bond offering, the Philippines conducted a tender offer for $1.5 billion of higher-yielding outstanding debt. The country has reduced its dependence on foreign borrowing through debt buybacks and swaps.

The central bank of the Philippines “has continued to bolster its strong track record of maintaining price and financial stability, contributing to favorable operating conditions for the country’s banking system,” Moody’s says.      


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