The Republic of the Philippines brings the second Asian sovereign in 24 hours and its third dollar bond this year.
The Republic of the Philippines priced a $1 billion dollar bond late Friday (Hong Kong time), at the end of a hectic 24 hours in the Asian bond markets, which saw the completion of three other benchmark-sized deals -- a sovereign from Sri Lanka, the largest Asian high-yield in more than a year from Indonesia's Adaro Energy, and another Korean offering from Korea Expressway.
The deluge of offerings had seemingly no impact on investor demand, however, with each of the deals being well subscribed.
The Philippines bond -- the country's third dollar-denominated deal this year -- attracted over $5 billion of demand and more than 200 accounts, and around the time of the Asian close on Friday, the bookrunners -- Deutsche Bank, HSBC and UBS -- felt confident enough to confirm that the size would be $1 billion and to tighten the guidance. The deal was initially announced in the US afternoon on Thursday at a size of $750 million to $1 billion.
One reason for the strong interest, according to sources, was the 25-year maturity. In Asia there hasn't been any dollar bonds with that kind of maturity for 18 months, which means investors with long-dated liabilities who tend to play this part of the curve were keen to make the most of the opportunity. The long end of the Asian curve in general has rallied lately and the volatility has come down; more specifically, there has been enough buying at the long end of the Philippines curve to suggest that there would be demand for another issue at that end. Indeed, the Philippines curve has been inverted at the long-end, making this a good opportunity for government to get long-dated funds at a reasonable cost.
One source noted that the debt market recovery is not stable enough that it can handle both longer dated issues and a greater number of deals, which partly explains the four issues at the end of last week. However, issuers are also aware that this favourable market sentiment will not last forever.
"This is not the final window this year, but we are coming up towards the final six to eight weeks of the year and the length of the windows are declining," the source said, noting that issuers that are planning to go to the debt capital markets are likely to try to do so sooner rather than later.
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