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Philippines returns to the panda bond market

The Republic of the Philippines (RoP), which first explored the panda bond market in March 2018, accessed it for a second time last week when it printed a 2.5-billion-yuan (CNY) (US$363.4 million) offering.

Panda bonds are Chinese renminbi (RMB)-denominated bonds from a non-Chinese issuer, sold in the People’s Republic of China. They made their debut in October 2005, when two panda bonds were simultaneously issued by the International Finance Corporation (IFC) and the Asian Development Bank (ADB).

The RoP’s latest panda bond offering saw the three-year bond priced at 3.58%, which allowed the sovereign to achieve a tighter spread of 32 basis points (bp) over the benchmark, with the order book amounting in excess of CNY 11 billion.

Debut offering

The RoP issued its inaugural panda bond in March 2018 amounting to CNY 1.46 billion, also for three years, with a coupon of 5% and a spread of 35bp over the benchmark, according to China Development Bank. That issuance was 6.32x covered with bids amounting to RMB 9.22 billion.

Leveraging on the Bond Connect scheme – a means of accessing the China Interbank Bond Market (CIBM) – 42.4% of the final allocation of the latest transaction was placed to China’s onshore investors and 57.6% went to overseas investors. Major investors include commercial banks from China’s onshore and offshore markets.

Commenting on the success of the second panda bond float the RoP’s finance secretary, Carlos Dominguez III, said. “Such confidence by the global investor community stems from our solid creditworthiness brought about by the government’s commitment to sound macroeconomic policies and fiscal discipline in the face of domestic and external challenges.”

The latest Panda bond deal, which was rated AAA by China Lianhe Credit Rating Company, came only days after the RoP’s return to the euro bond market when it priced an eight-year, €750-million (US$842.7 million) issue.

This also represented the third time this year that the sovereign has tapped the offshore bond market for fundraising, having accessed the US dollar bond market in early January in the region of US$1.5 billion for 10 years.

National treasurer Rosalia de Leon says the success of the Panda bond transaction, along with the recent issuances, resonates the positive market sentiment toward Philippine credit. “Through strategic and timely offerings, we are able to tap various markets even in a challenging environment that allowed for the Philippines to achieve more cost-efficient pricing,” she adds.

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