Eurobond float now off the table, Treasury says

The government’s planned float of euro-denominated bonds in the second half of this year is now off the table as the state has already raised funds through US dollar-denominated bonds, which cost less, the Bureau of the Treasury said.

“Not anymore. When we issued the last, the $2.5-billion bonds [issued on Aug. 28], it’s more cost-efficient rather [than the euro bonds]. On a swap basis, the euro is more expensive so it’s really the dollar,” National Treasurer Sharon Almanza said on Tuesday.

Almanza told reporters that while eurobonds were previously considered as an option, they won’t be pursued this year.

Still, she added that they are still looking into samurai bonds or yen-denominated securities.

“It will depend because we’re also watchful of the Bank of Japan’s (BOJ) move if they will hike [rates] although the yen is appreciating now so it’s better,” the Treasurer said.

“At first as [we were] contemplating, it’s really depressed but now it’s recovering,” she said.

The last time that the Philippines had tapped the samurai bond market was in April 2022 during the Duterte administration, when it raised a total of ¥70.1 billion or P28.55 billion.

The BOJ has raised its interest rate by 15 basis points to 0.25 percent from between 0 and -0.1 percent in July, making it the biggest hike since 2008.

The Philippine government plans to borrow a total of $5 billion this year, having already secured $4.5 billion through the issuance of dollar bonds in August and May. This leaves $500 million still to be raised.

Asked on where they will source out the remaining amount, Almanza said that they have made adjustments and are continuing to monitor the government’s deficit.

For the first seven months of this year, the government’s budget deficit increased by 7.2 percent to P642.8 billion from the level a year ago.

“We’ve made adjustments, if you would look at the Budget of Expenditures and Sources of Financing (BESF), because we will be able to also source some loans from official development assistance (ODA). There is a little revision in the commercial for this year but we’re monitoring,” she added.

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In the latest BESF, the government expects to receive P306.6 billion in program loans and P68.73 billion in project loans this year from ODA sources, much higher compared to the initial P295.85 billion and P36 billion, respectively. These loans will support the government’s priority projects.

The Marcos administration’s borrowing program is set at P2.57 trillion this year, of which 20 percent will come from foreign sources.

Meanwhile, Almanza also said that they have not yet determined whether it will issue additional retail Treasury bonds this year, as it has already borrowed sufficient funds from the domestic market.

“We don’t really need to fill the programmed borrowing for the year which is around almost P2.5 trillion. For better management of costs, debt service, we don’t need to borrow everything and what we borrowed is already big,” she added.

The government borrows to plug its budget deficit as economic managers commit to invest further in infrastructure projects.

The Marcos administration is looking at raising P630 billion from fresh local borrowings in the third quarter, a 7.7-percent increase from the P585-billion domestic borrowings in the previous quarter.