The Republic of the Philippines (RoP) returned to the Panda bond market when it printed on May 15 a 2.5-billion-yuan (US$363.40 million) offering.
The three-year bond was priced at 3.58%, which allowed the sovereign to achieve a tighter spread of 32bp over the benchmark, with the order book amounting in excess of 11 billion yuan.
The RoP issued its inaugural Panda bond in March 2018 amounting to 1.46 billion yuan, also for three years, with a coupon of 5% and a spread of 35bp over the benchmark China Development Bank notes. That issuance was 6.32x covered with bids amounting to 9.22 billion renminbi.
Leveraging on the Bond Connect scheme, 42.4% of the final allocation of the latest transaction was placed to China’s onshore investors and 57.6% went to overseas investors. Major investors include commercial banks from China’s onshore and offshore markets.
Finance secretary Carlos Dominguez III attributes the success of the second Panda bond float to the high level of confidence the international markets place in the Philippines. “Such confidence by the global investor community stems from our solid creditworthiness brought about by the government’s commitment to sound macroeconomic policies and fiscal discipline in the face of domestic and external challenges,” he points out.
The latest Panda bond deal, which was rated AAA by China Lianhe Credit Rating Company, comes hard on the heels of the RoP’s return to the euro bond market last week when it priced an eight-year, 750-million-euro (US$842.70 million) issue.
This also represented the third time this year that the sovereign has tapped the offshore bond market for fundraising, having accessed the US dollar bond market in early January in the region of US$1.5 billion for 10 years.
National treasurer Rosalia de Leon says the success of the Panda bond transaction, along with the recent issuances, resonates the positive market sentiment toward Philippine credit. “Through strategic and timely offerings, we are able to tap various markets even in a challenging environment that allowed for the Philippines to achieve more cost-efficient pricing,” she adds.