The Philippines raised $1 billion from its first global sale of peso-denominated bonds, helping the nation fund a record budget deficit.
The 4.95 percent notes due January 2021 were priced to yield 5 percent, the Finance Ministry said in a statement. Citigroup Inc. and Deutsche Bank AG were the global coordinators for the sale. Credit Suisse Group AG, Goldman Sachs Group Inc., HSBC Holdings Plc and JPMorgan Chase & Co. were also arrangers.
“The Peso Global Bond is expected to enhance the government’s debt investor profile while paving the way for greater participation by offshore investors in the Philippine capital markets,” Treasurer Roberto Tan said in the statement.
Developing-nation issuers sold $1.8 billion of local- currency debt in overseas markets this year, the most since the same period in 2007, data compiled by Bloomberg show. The peso bonds will be popular as they are exempt from 20 percent tax on interest and because Asian currencies are rising, Union Investment and Erste Sparinvest KAG said before the sale.
Bids exceeded $7 billion, according to two people with knowledge of the issuance, who asked not to be identified because the details are private.
“Make no mistake there’s enough global emerging-markets money that is not invested in this market,” said Kenneth Akintewe, a Singapore-based investment manager at Aberdeen Asset Management Plc, which oversees $246 billion globally. He described it as a "red-hot issue."
Asia-based investors bought 37.1 percent of the offering, with U.S. bidders taking 32.6 percent and the remainder going to Europeans, the government said.
President Benigno Aquino’s administration, which projected a deficit of 325 billion pesos ($7.4 billion) this year, is seeking to improve the nation’s finances by reducing borrowing costs. Finance Secretary Cesar Purisima said this month the 2011 shortfall may shrink to 226 billion pesos, or 2.5 percent of gross domestic product, if the economy expands 7 percent.
“The sentiment for the Philippines is positive” as proven by the rising peso and stocks, Purisima told reporters.
Colombia sold $1.3 billion of local currency bonds in international markets this year. Chile sold $520 million of 10- year bonds in pesos at 5.5 percent on July 30, about 60 basis points, or $24 million, less than the cost of borrowing locally, Finance Minister Felipe Larrain said.
The Philippines plans to raise the equivalent of 193 billion pesos from overseas debt sales this year, Treasurer Tan said last month. The government sold $1.5 billion of dollar- denominated bonds and 100 billion yen ($1.2 billion) of Samurai notes in the first quarter.
The government has plans to issue dollar bonds due in more than 10 years in exchange for shorter-dated debt, Tan said last month. The government had tapped Citigroup, HSBC and UBS AG for the exchange, a government official said this week.
Aquino plans to invest 200 billion pesos building roads, railways and ports to achieve the fastest economic growth in three decades by 2011 and catch up with Indonesia’s credit rating. The Philippines’ long-term foreign-currency debt ratings are Ba3 at Moody’s Investors Service and BB- at Standard & Poor’s, three levels below investment grade. Indonesia is rated one level higher at both Moody’s and S&P.
The Philippine budget deficit widened to 229.4 billion pesos in the first seven months, or 70.6 percent of the full- year target. The government has cut back on travel and training to limit spending and rein in the deficit, Budget Secretary Butch Abad said this month.