By Luisa Maria Jacinta C. Jocson, Senior Reporter

MILAN, Italy — The Philippine government is not likely to issue another global bond this year as it has almost completed its program for foreign borrowings, the Bureau of the Treasury (BTr) said.

On the sidelines of the 58^th ADB Annual Meeting, National Treasurer Sharon P. Almanza told reporters they do not expect to launch any more sizable offshore bond issuances for the remainder of the year.

“Probably not. We were able to raise almost $3.2 billion already, we’re almost done. Almost done for the year,” she said in mixed English and Filipino.

In January, the National Government (NG) raised $3.29 billion from its sale of US dollar and euro bonds, its first global bond offer for the year.

The NG’s commercial borrowing program is pegged at $3.5 billion this year.

This year’s overall financing program is set at P2.55 trillion, of which 20% or about P500 billion will come from foreign sources.

Asked if they will issue bonds to meet the target, Ms. Almanza said “it depends” but said they are not looking at any more substantial bond offers like a Sukuk or a retail bond issuance.

Meanwhile, the Treasury is also seeking to include more of its recently launched fixed-rate Treasury notes (FXTN).

“We really want to have benchmark size ones. And one way to build size is through book building. It’s kind of like a retail treasury bond (RTB) but not exactly, in the sense that it’s an FXTN,” she said.

“Because for RTB, we cannot do a reissuance. RTB is just one time. Now, we’re shifting. We will still have RTB but maybe the size will not be the same as before. Maybe smaller,” she added.

In April, the government sold P300 billion worth of FXTN, which was 10 times the initial P30-billion offering.

Ms. Almanza said the FXTN notes will now be added to the lineup of the BTr’s bond issuances.

“Because the intention is to have more benchmark bonds. That’s what the investors want. They want big weight because right now we have so many ISINs (International Securities Identification Numbers).”

“Now, if we’re able to convert most of our issuances to bigger size, it’s better because there is liquidity, and the volume dictates liquidity,” she added.

While the government is seeking to further reduce foreign currency exposure in its overall borrowings, Ms. Almanza said the current 80:20 mix is at a good level.

“It’s a function of liquidity. If all of that is domestic, potentially rates may go up and then, we will crowd out investment… Even if you want to source 90% (domestic), our deficit is so big. If our deficit is only P1 trillion, we could possibly do 90:10,” she said.

“In 2019, the deficit was so small, so the requirements were small as well. We were only borrowing less than P1 trillion in domestic. Now, we’re borrowing P2 trillion.”

The NG’s deficit ceiling is capped at P1.54 trillion or 5.3% of economic output this year.

Ms. Almanza noted the importance of local currency conversion.

“It’s very important because we will be able to manage our FX (foreign exchange) exposure even if we cannot source majority or at least we cannot source 80% from our local market.”

“Right now, our market is very liquid. We are confident that liquidity is sufficient so that we will be able to raise substantial funding from the market. But what if there will come a time that liquidity will dry up? Maybe it still makes sense to borrow abroad.”

BOND INDEX
Meanwhile, Ms. Almanza said that efforts to re-enter JPMorgan Chase & Co.’s emerging market government bond index are still underway.

“They said most countries are able to get in the index, on average, around three years,” she said, noting they began the process in 2023.

She said participation by nonresidents in the market has been very small.

“I think the highest that we have is about less than 8%, that’s way back in 2008, during the peak of the Global Financial Crisis,” she added.

JPMorgan is scheduled to have a consultation survey in May and June, with the results likely out by October.

“They will start to have that survey and meet individual investors and hopefully they will be able to convince each of them,” Ms. Almanza said.

“They will tell the investors the updates, all these initiatives that we’re doing and hopefully, the investors are also able to really feel that somehow the liquidity has improved because we’ve seen participation starting this year.”

She noted that in the FXTN offer, more than 10% of the participants were foreign investors.

The BTr has been working on measures to encourage foreign participation, Ms. Almanza said.

‘There are several issues that we’re trying to address, one of which is liquidity. That’s one concern of nonresident investors.”

For example, the Treasury has been working on the consolidation of its issuances.

The Treasury is also working to enhance transparency and predictability in its issuances, she added.

JPMorgan’s Government Bond Index-Emerging Markets (GBI-EM) tracks the performance of sovereign and quasi-sovereign bonds issued by emerging market countries. The country’s inclusion will need to be approved by a certain percentage of investors reviewing the index.

The Philippines’ global peso notes were removed from the GBI-EM in January last year due to illiquidity.