Philippines Sells $866 Million of Maiden Retail Dollar Bonds

·2 min read

(Bloomberg) -- The Philippines raised $866 million from its debut sale of dollar bonds targeted at individuals as it seeks to expand funding from that lucrative investor pool.

In a two-part offering, 10-year retail notes were priced at 2.25% and five-year bonds at 1.375%, according to the Bureau of the Treasury. While the debt sale is small compared with the $3 billion of overseas notes sold by the government in June, individual investors are becoming a stalwart source of funding for the Philippines. The sovereign raised about $9 billion from a sale of peso-denominated retail bonds in March.

“Retail dollar bonds could become a regular debt instrument, given the large number of dollars held by Filipinos, many of them in savings deposits,” said Ed Francisco, president of BDO Capital & Investment Corp., one of the deal’s issue managers.

The move comes as emerging-market borrowers face a recent rise in borrowing costs, prompting them to look for cheaper funding channels. The yield on the Philippine’s 10-year local bond traded near a four-month high this week.

The rise in EM financing costs has been triggered in part by some investors considering shifting away from such assets toward safer debt they expect could pay higher yields ahead after the Federal Reserve discussed the possibility of slowing the pace of bond buying. Still, borrowers could get some respite after a less-than-forecast increase in U.S. inflation on Tuesday, which some observers say could give the Fed more flexibility in paring stimulus.

The Philippines plans to borrow a record 3.1 trillion pesos ($62 billion) from domestic and international sources this year and about 2.5 trillion pesos next year.

(Updates with amount raised, pricing of retail dollar bonds)

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