By Clarissa Batino and Lester Pimentel
Jan. 8 (Bloomberg) -- The Philippines and Turkey sold $2.5 billion of bonds in international markets, joining a push by developing nations to take advantage of a decline in borrowing costs to finance budget deficits.
The Philippines sold $1.5 billion of 10-year notes to yield 8.5 percent, or 6 percentage points more than U.S. Treasuries, while Turkey sold $1 billion of eight-year bonds to yield 5.01 percentage points above Treasuries. The countries follow Brazil and Colombia, which each sold $1 billion of bonds this week.
The Philippines sale, which is triple the amount it issued all last year, will help the government arrange financing for a stimulus plan that aims to pull the Southeast Asian nation out of its worst economic slump in eight years.
“The Philippines has a first-mover advantage and good timing before the rest crowd international debt markets,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte. “Chances are that credit will become tighter down the road given the huge fiscal expansion of governments including the U.S.”
Yields on emerging-market debt have declined the past two months, reversing a surge in September and October sparked by the global financial crisis. The extra yield investors demanded for Philippine dollar debt over 10-year U.S. Treasuries dropped to 5.9 percentage points from as high as 9.85 percentage points in October, ING prices show.
Widening Deficit
The sale completes the Philippines’s foreign bond program for the year, Treasurer Roberto Tan said today in a telephone interview. ING Groep NV forecasts emerging-market dollar bond sales may rise 68 percent to $65 billion this year. South Korea’s government plans to borrow up to $6 billion this year and Indonesia in November said it may raise about $2.1 billion in dollar-denominated debt in 2009.
The Philippine government asked Congress to approve a 9 percent increase in spending, excluding interest payments, to stoke the economy. It predicts the budget deficit will widen to the most in four years in 2009 as revenue collection falters. Economic growth may slow to 3.7 percent this year, which would be the weakest since 2001, according to government estimates.
The government boosted its domestic borrowing plan this year by 20 percent to 386.5 billion pesos ($8.3 billion) from an earlier plan of 321.5 billion pesos, Finance Secretary Gary Teves said in November.
Standard & Poor’s rates the Philippines’s foreign-currency debt BB-, or three levels below investment grade. Moody’s rates it B1, four levels below investment grade, while Fitch Ratings rates it BB, two levels below. Turkey’s bonds are rated Ba3, or three steps below investment grade, by Moody’s, and BB- by S&P.
Credit Suisse Group, Deutsche Bank AG and HSBC Holdings Plc managed the $1.5 billion bond sale. Citigroup Inc. and HSBC managed Turkey’s sale.
Brazil on Jan. 6 sold 10-year notes to yield 6.13 percent, or 3.7 percentage points above U.S. Treasuries, while Colombia sold 10-year securities to yield 5.03 percentage points more than Treasuries. Chilean Finance Minister Andres Velasco said that day the government may issue its first foreign bonds since 2004 to help fund a fiscal stimulus plan.
To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net; Lester Pimentel in New York at lpimentel1@bloomberg.net
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