Upgrade on PH credit rating a plus on planned ROP issuance

MANILA -- National Treasurer Rosalia De Leon said Monday’s upgrade by Fitch Rating of its ratings on the Philippines will further boost the government’s planned US dollar-denominated bond issuance in early 2018.

“I think, if ever we go out it’s very good timing following the Fitch upgrade today,” she told reporters after the auction of Treasury bills (T-bills).

Fitch revised upwards to 'BBB' from 'BBB-' with Stable outlook Philippines' credit ratings, which is two notches above junk status, on account of sustained improvement of macroeconomic fundamentals.  It first elevated the domestic economy to investment grade in 2013.

De Leon said markets “are already pricing ROPs (Republic of the Philippines US dollar bond) much tighter even without the Fitch upgrade.”

She said Philippines’ finance officials are continuously monitoring market developments given the upgrade's impact on domestic financing, among others.

These developments include any action by the Federal Reserve, the end of term of current Fed Chair Janet Yellen in February 2018, the incoming term of Jerome Powell, who was nominated by US President Donald Trump as next Fed chair; and market sentiment on the Department of Finance’s (DOF) proposed tax reforms.

De Leon said that for one, market players have seen DOF’s commitment on the tax reform proposal, package one of which is now being deliberated by the Bicameral Conference Committee and Package 2 is being readied.

“We are also seeing very good fiscal performance both on the revenue and expenditure side. At the same time on the part of the Treasury we are also matching that, we are ready to meet any requirements given that we have the successful RTB (Retail Treasury Bond) issuance,” she said.

BTr recently issued PHP255.4 billion worth of RTB, proceeds of which will be used to finance the government’s programs next year.   

RTBs are intended for small investors since minimum placement is PHP5,000 and additional issuance is in increments of PHP5,000.

Any ROP issuance of the government needs the approval of the Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB).

De Leon said they have not secured any approval for the planned issuance.

She, however, said that this is already part of the government’s 80:20 borrowing mix for 2018, PHP176 billion of which accounts for foreign borrowing while total programmed borrowing is PHP888.2 billion.

The last time the government issued dollar-denominated bond was in January 2017, wherein it issued USD2 billion worth of 25-year debt paper at a rate of 3.70 percent. (PNA)