The Republic of the Philippines (RoP) accessed the international debt capital markets for the second time this year as it priced on August 29 a triple-tranche offering totalling US$2.5 billion, including a new sustainability bond.

The Securities Exchange Commission-registered issuance comprised of a 5.5-year tranche amounting to US$500 million, which was printed at a yield of 4.375%, or equivalent to a spread of 75 basis points (bp) over US treasuries. This was in line with the final price guidance and 35bp tighter than the initial marketing range in the 110bp area, achieving a new issue concession of 5bp.

The second tranche is for 10.5 years amounting to US$1.1 billion and was priced at a yield of 4.750%, representing a spread of 95bp over US treasuries. This was also in line with the final price guidance and 30bp inside the initial price guidance in the 125bp area, resulting in no new issue premium.

The final tranche is a sustainability bond amounting to US$900 million with a tenor of 25 years – the RoP’s sixth G3 environmental, social and governance (ESG)-related bond offering. It was priced at par at 5.175%, which was likewise in line with final price guidance and 32.5bp back of the initial price range in the 5.50% area, achieving a new issue concession of 2.5bp.

The RoP first tapped the offshore bond market this year in May with a dual-tranche issuance totalling US$2 billion.

In executing the latest transaction, the sovereign conducted a global investor call on August 28. The RoP took advantage of the moderating benchmark yields as softer inflation data and increasingly dovish US Federal Reserve rhetoric fuelled investor certainty of upcoming rate cuts in September, with the question now around the extent of the cuts.

The deal garnered a combined order book of US$4.86 billion with strong momentum carried across markets, and with interest from a diverse pool of high-quality global accounts. The 5.5-year tranche attracted demand amounting to US$860 million from 65 accounts, while the 10.5-year bond had orders worth US$2.2 billion from 121 accounts. The 25-year sustainability bond, on the other hand, generated a total demand of US$1.8 billion from 103 accounts.

The 5.5-year spread is the tightest among all US dollar 5/5.5-year issuances by the RoP since June 2021, while the all-in yield for the 10.5-year and 25-year is the tightest among all US dollar 10/10.5-year and 25-year issuances by the sovereign since March 2022.

Compared with other BBB-rated sovereigns in the region, the 5.5-year spread is the second-tightest spread achieved in 2024 year-to-date among the 5/5.5-year issuances, and the all-in yield for the 10.5-year is the tightest among all US dollar 10/10.5-year issuances since May 2022. The all-in yield for the 25-year is the tightest among all US dollar 25-year issuances since March 2022.

Commenting on the bond offering, Philippine finance secretary Ralph Recto notes that the Philippines’ issuance, compared with its regional peers, achieved among the best pricing in all of its tranches this year. “This is a resounding vote of confidence in our country’s solid credit profile,” he says. “More importantly, this is a significant win for every Filipino as we are raising funds at very affordable costs to support programmes and projects that will boost economic growth, create quality jobs, increase incomes and reduce poverty.”

Meanwhile, national treasurer Sharon Almanza says the positive reception and tight pricing of new bond transaction reflect the continued investor confidence in the country’s creditworthiness and robust economic performance, even amid a challenging global environment. “The exceptionally tight pricing across all offerings enables the government to conserve on interest payments, thereby allowing more fiscal space to flow into transformative investments,” she points out. “Thus, the favourable outcome of the transaction further strengthens the Philippine government’s position to fulfil its commitments to fiscal consolidation and rapid economic growth.”

The RoP intends to use the proceeds from the sale of the 5.5-year and 10.5-year bonds for general budget financing, while proceeds from the sale of the 25-year sustainability bond are intended for general budget financing and refinancing programmes and expenditures in line with the country’s sustainable finance framework.

HSBC, Standard Chartered and UBS were the joint sustainability structuring banks for the transaction, as well as the joint bookrunners and lead managers, along with BNP Paribas, Citi, Goldman Sachs J.P. Morgan and Morgan Stanley.