Manila: The Philippines started its second global sale of peso-denominated bonds, attracting investors including Jyske Bank A/S and Pictet Asset Management with tax breaks and the potential for currency gains.
The 25-year notes will be settled in dollars and may be sold as early as yesterday, said three people familiar with the matter, who asked not to be identified as details are private. The government has approval to sell up to $1.5 billion of the debt, Treasurer Roberto Tan said on Tuesday, four months after its maiden issuance in September drew $13.3 billion in bids.
The peso will strengthen 4.7 per cent to 41.80 per dollar by the end of 2011, according to the median estimate of 10 analysts in a Bloomberg survey. Jyske Bank and Pictet said the government needs to offer a yield of at least 6.5 per cent, which is a fifth less than prevailing rates, because the interest income on the securities isn't subject to 20 per cent withholding tax.
"An appreciating peso is an important factor," Patrick Bengzon, who helps manage $11.8 billion at Jyske in Silkeborg, Denmark, said. "I am positive on the peso. Probably I will buy some, depending on the level and market mood."
The government said in a statement it hired Citigroup, HSBC Holdings, Credit Suisse Group, Deutsche Bank, JPMorgan Chase and UBS to handle the sale. The debt will be sold in the "near future," it said.
The Philippines raised $1 billion from its first global sale of local-currency bonds, which were due in 10 years.
The 4.95 per cent note due January 2021 has returned 6.9 per cent since September, according to prices from ING Groep NV. That compares with the yield on local peso debt of 6.08 per cent. The prevailing yield on 25-year domestic debt is 8.1 per cent.
