Philippines plans first retail bond under Marcos presidency

THE Philippines is planning to sell its first local-currency bonds to retail investors since Ferdinand Marcos Jr became president, in a debt offering that may raise billion of US dollars.

The sovereign will sell initially at least 30 billion pesos (S$742.2 million) of bonds due in 2028, and allow existing holders to exchange debt due this year and early next year for the new securities, according to bankers involved in the transaction.

The sale can easily raise US$7 billion, said Michael Ricafort, chief economist at Rizal Commercial Banking in Manila.

“In the near-term, the new supply of debt will limit any downside on local yields,” said Rizal’s Ricafort. “In the longer-term, this may help push yields lower as a large issuance means less debt supply in the future.”

Government bonds are popular with Asian retail investors. Indonesia and Hong Kong offer them, while India opened up its sovereign market to individual buyers last year, allowing members of the public to have accounts with the central bank to buy securities.

In the Philippines, retail investors are a massive source of financing and the government raised US$8.2 billion in March, equivalent to a fourth of its local borrowing program this year. Marcos who took power in June plans a record spending spree to boost the nation’s recovery from the pandemic.

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Philippine Treasurer Rosalia de Leon declined to comment.

The amount to be raised is likely to be sizable given the government’s large requirement, 1 of the bankers said, asking not to be identified because they’re not authorized to discuss the matter in public.

Retail bonds are typically offered in small denominations of 5,000 pesos, making them accessible to a large base of savers seeking higher returns than bank deposits. Still, that doesn’t stop institutional investors from buying them too.

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The Bureau of the Treasury will hold a price-setting auction for the planned bond sale on Aug 23, the bankers said. BLOOMBERG