PH’s success in bond issuances in 2023 underscores strong investor confidence

The Philippines, through the Bureau of the Treasury (BTr), has efficiently raised funds for economic development through its successful local and international bond issuances in 2023, which underscores strong investor confidence in President Ferdinand R. Marcos, Jr.’s administration.

The country successfully returned to the international capital markets for the first time in January 2023 with the issuance of its USD 3 billion (about PHP 166.98 billion) worth of 5.5-year, 10.5-year, and 25-year US dollar-denominated global bonds, with the latter a part of the Sustainable Finance Framework.

The 25-year sustainable bond offering is the fourth environmental, social, and governance (ESG) bond offering of the Philippines following the USD 2 billion (about PHP 111.35 billion) triple-tranche bond offering in October 2022, the JPY 70.1 billion (about PHP 27.49 billion) four-tranche Samurai bond in April 2022, and the USD 2.25 billion (about PHP 125.25 billion) triple-tranche bond offering in March 2022.

The rate of the 5.5-year and 10.5-year global bonds were priced at 105 basis points (bps) and 145 bps above similar tenor US Treasuries, with a coupon of 4.62 percent and 5 percent, respectively.

The coupon rates are 50 basis points tighter than the initial price guidance of 155 bps area and 195 bps area, respectively.

Meanwhile, the 25-year Sustainability bond was priced at 5.50 percent at par, 45 bps tighter than the initial price guidance of 5.95 percent area.

Before the end of 2023, the Philippines expanded its financing avenues to cater to Middle Eastern and Islamic instrument investors through the issuance of its maiden Sukuk bonds.

This involved leveraging real estate assets under Ijara and Wakala structures, along with incorporating a Commodity Murabaha element.

The issuance, amounting to USD 1 billion (about PHP 55.67 billion) in 5.5-year Sukuk, was priced at 80 bps above US Treasuries, equivalent to a rate of 5.04 percent.

The order book reached a peak oversubscription of 4.90 times. Notably, 30 percent of the certificates issued found buyers among Middle Eastern investors, underscoring the country’s success in tapping the Islamic market.

“The Sukuk issuance is a pivotal step in the Marcos, Jr. administration’s goal to foster the growth of the Philippine financial sector and harness the untapped potential of Islamic banking in the country, thus broadening the investor base,” Secretary Diokno said.

“As evidenced by the successful global bond issuances we offered this year, we are pleased to see international investors’ continued recognition of the Philippines’ strong economic recovery, sound fiscal policies, and sensible socioeconomic agenda to promote sustainable and inclusive economic growth,” he added.

Domestically, the BTr issued the 29th tranche of the Retail Treasury Bond (RTB 29) in February 2023 which raised PHP 283.71 billion during the nine-day offer period, achieving its target volume ahead of schedule.

During the nine-day offer period, orders reached PHP 130 billion per day on average.

The RTBs have promoted greater financial literacy and inclusion among Filipinos as they are easily accessible to the investing public through online channels.

The digitalization of the country’s financial system through the BTr’s Online Ordering Facility, as well as the LANDBANK, OFBank, and Bonds PH mobile applications played a crucial role in bringing in transactions worth PHP 311.015 million with 2,926 of them coming from 36 countries.

The second tranche of the Retail Dollar Bond (RDB 2), which was issued months later in October 2023, likewise received strong demand.

RDB 2 was able to raise a total of USD 1.26 billion (about PHP 70.14 billion), over six times the initial target of USD 200 million (about PHP 11.13 billion).

The support from retail investors yielded over USD 146 million (about PHP 8.13 billion) from over 3,900 transactions due to the lowered minimum investment amount from USD 300 (around PHP 16,000) to just USD 200 (around PHP 11,000), and in multiples of USD 100 (around PHP 5,000).

RDB2 had a tenor of 5.5 years and a gross interest rate of 5.75 percent per annum, payable every quarter until its maturity in 2029; and guaranteed final withholding tax on interest for RDBs by the Philippine government.

Moreover, it was accessible through convenient payment channels such as traditional and online platforms.

In particular, online platforms generated a total volume of USD 2.56 million (about PHP 142.50 million) from 1,126 transactions––more than triple the amount of what was raised during the maiden offering of the RDB. Of the total amount, USD 532,600 (about PHP 29.65 million) came from Overseas Filipinos residing in 32 different countries.

“The overwhelming support we’ve received from both RTB 29 and RDB 2 allowed the National Government to raise a total of PHP 355.57 billion, which comprises 21.50 percent of the government’s annual domestic funding program,” Secretary Diokno said.

The following month, the Bureau issued the Philippines’ first-ever Tokenized Treasury Bonds (TTBs) in November 2023.

TTBs are aimed at promoting greater financial inclusion and broader participation in the bond market.

Strong demand was seen from qualified institutional investors with the book size reaching PHP 31.426 billion, which is more than three times the target issue size of PHP 10 billion.

This allowed the BTr to upsize the issue to PHP 15 billion at 6.50 percent, aligned with the prevailing 1-year secondary market rates despite the non-tradability of the TTBs.

The TTBs, which settled on November 22, 2023, were issued in the form of digital tokens to be maintained in the BTr’s Distributed Ledger Technology (DLT) Registry.

For the program, the BTr implemented a dual registry structure, with the DLT Registry running in parallel with the National Registry of Scripless Securities (NRoSS), with the NRoSS serving as the primary registry.

“Capping off 2023 with strong demand and investor appetite for our issuances, we are optimistic of even stronger investor confidence in 2024. These financing efforts will not only boost economic development but also encourage ordinary Filipinos to start investing in safe and stable sources of passive income”, Secretary Diokno said.

The BTr has also helped Filipinos manage their finances by expanding its financial literacy programs and financial inclusion outreach initiatives through various roadshows domestically and overseas during retail bond issuances and Philippine Economic Briefings (PEBs).

On top of this, the Bureau introduced the RTB Tracker to help retail investors make informed investment decisions.

Apart from government securities, the BTr continues to generate revenues through its regular operations in order to support the Marcos, Jr. administration’s programs and projects.

As of October 2023, the Bureau has already recorded PHP 74.191 billion in income, almost four times its 2023 target of PHP 19 billion.

Moreover, the Bureau was able to collect PHP 2.46 billion from dormant funds maintained in the Bangko Sentral ng Pilipinas (BSP).