Recto: No more global bond issuances this year

By Aubrey Rose A. Inosante, Reporter

THE NATIONAL GOVERNMENT (NG) is unlikely to offer more offshore bonds this year, Finance Secretary Ralph G. Recto said.

This as the NG has only raised $4.5 billion out of its $5-billion plan to borrow from the international debt market this year.

Asked if the NG plans to borrow the remaining $500 million from the offshore market this year, Mr. Recto replied: “I don’t think so.”

He said the government may opt to tap the domestic debt market for the remainder of the year.

So far this year, the government has issued US dollar-denominated global bonds, raising $2 billion in May, and another $2.5 billion in August.

At the same time, Mr. Recto said that the government has yet to finalize its plans for global bond offerings in 2025.

However, he said the NG aims to continue lowering the share of external borrowings in its borrowing program.

“We want to reduce the foreign debt stock to 10% at a particular point in time,” he told BusinessWorld on the sidelines of a budget hearing at the Senate last week.

This year, the government set a 75:25 borrowing mix, in favor of domestic sources.

For 2025 to 2027, the NG plans to source at least 80% of its borrowing program from domestic sources, and 20% from foreign lenders, according to the 2025 Budget of Expenditures and Sources of Financing.

For next year, the NG plans to borrow P2.55 trillion, 0.97% lower than P2.57 trillion this year. Of this, domestic borrowings are set at P2.04 trillion, while external borrowings are pegged at P507.41 billion.

Meanwhile, Donald J. Trump’s return to the US presidency will impact Treasury bond yields and result in a stronger dollar, analysts said.

“Government may have to weigh the cost of borrowing USD-based debt due to higher cost and peso volatility and maybe consider alternative offshore sources and more of local,” First Metro Investment Corp. Head of Research Cristina S. Ulang told BusinessWorld in a Viber Message.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said that if the US Federal Reserve keeps rates high in 2025, the cost of offshore debt for the Philippines will increase.

“With Trump winning the elections, it could signal shifts in US trade and monetary policies, potentially influencing global capital flows and emerging-market conditions,” Mr. Rivera said.

“Frontloading debt issuance in early 2025 could offer the Philippines a window to lock in rates before any further Fed rate hikes or policy shifts under Trump administration.”

Institute for Development and Econometric Analysis, Inc. President Alexander C. Escucha said “frontloading any borrowing makes sense when rates are low, and you expect interest rates to go down.

However, this does not seem to be the “likely scenario” in the present, he said.

“In the last 2-3 months the Fed and Bangko Sentral ng Pilipinas (BSP) cuts were premised on inflation getting under control and further rate cuts even expected,” Mr. Escucha said. “But that short-term scenario may be on hold in the meantime, as the market absorbs the implications of the Trump victory.”

Since beginning its easing cycle in August, the Monetary Board has cut rates by 50 basis points (bps), bringing the central bank’s key rate to 6%.

BSP Governor Eli M. Remolona, Jr. has signaled a possible 25-bp rate cut in December, which would bring the benchmark rate to 5.75% by the end of 2024.