The Philippines sold $1.5 billion of bonds, adding to the busiest week for Asian sovereigns on record as slowing U.S. stimulus threatens to increase funding costs.
The nation, Southeast Asia’s fastest-growing economy, sold 10-year bonds to yield 4.2 percent, according to data compiled by Bloomberg. That brings total dollar-denominated issuance by Asian governments since Jan. 6 to $6.5 billion, the most in data compiled by Bloomberg going back to 1999. Indonesia and Sri Lanka sold $5 billion earlier this week.
Asian governments are looking to borrow after the Federal Reserve announced it would taper record stimulus, increasing the yield on benchmark U.S. debt. Interest rates on 10-year Treasuries have risen 1.34 percentage points since May, when the central bank indicated it was considering trimming bond purchases. The average cost of dollar funds for the region’s sovereigns rose as high as 5.83 percent in September, up from an average 4 percent in 2012, JPMorgan Chase & Co. indexes show. Borrowers now pay 5.16 percent.
“Philippine authorities are trying to lock in current yields,” said Desmond Soon, a Singapore-based fund manager at Western Asset Management Co., which oversees $442.7 billion globally. “There is expectation U.S. Treasury yields will go higher over the course of the year.”
The Philippines, which won investment-grade ratings from Standard & Poor’s, Moody’s Investors Service and Fitch Ratings Ltd. for the first time in 2013, last sold dollar debt in January 2012, according to data compiled by Bloomberg.
U.S. investors bought 53 percent of the country’s latest sale, according to a statement from the Philippines’ finance department. Fund managers took 71 percent.
“To get exposure to the Philippines is becoming more difficult since less material is out in the market,” Sergey Dergachev, who helps oversee about $9 billion as a senior portfolio manager at Union Investment Privatfonds in Frankfurt, wrote in e-mailed responses to questions. “New issues are the best opportunities.”
The notes, which priced at par, climbed to 101 cents on the dollar as of 2:10 p.m. in Manila, according to Standard Chartered Plc prices.
The country, whose $250 billion economy grew at least 7 percent in the five quarters through September, will use some of the proceeds from the sale to buy back foreign-currency bonds and for budgetary support, among other general purposes. The nation has agreed to pay $1.08 billion to buy back notes from six offerings, a person familiar with the matter said today, asking not to be identified because the details are private.
“This exercise is in line with the government’s overall objectives of prudent and proactive liability management, and resulted in interest-cost savings as well as extended the average debt maturity profile of the Philippines,” Treasurer Rosalia de Leon said in the finance department’s statement.
The yield on the nation’s $1.6 billion of bonds due in 2025 fell 17 basis points, or 0.17 percentage point, to 4.37 percent yesterday, according to data compiled by Bloomberg.
Mexico sold $2.5 billion of debt due in 2021 and 2045 in its first international offering since its credit rating was lifted last month by S&P. Earlier this week, Poland sold the most euro-denominated bonds in four years, taking advantage of the growing gap between borrowing costs in the shared currency and dollars.
Asian sovereign bonds lost 7.2 percent last year, the most since 2008, according to the JPMorgan indexes. Tighter funding conditions in the U.S. dollar market are bringing some of emerging Asia’s vulnerabilities into focus, Fitch Ratings wrote in a note dated yesterday.
South Korea and Thailand may sell dollar bonds this year while Indonesia could return with a second offering, according to Avanti Save, a Singapore-based credit strategist at Barclays Plc.
Indonesia sold $2 billion each of 10-year and 30-year bonds on Jan. 7, data compiled by Bloomberg show. The 10-year bonds priced to yield 5.95 percent, the data show. Sri Lanka meanwhile raised $1 billion from a sale of five-year notes a day earlier, the data show.
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