Philippines prices through its own Treasury curve

HSBC helps the government save $11 million in interest payments.

Using a Dutch auction process, the Republic of the Philippines raised Ps11.2 billion $216 million earlier this week from the domestic bond market. The HSBC-led auction differed from standard practise, however, as Government Securities Eligible Dealers GSEDs were required to bid through the government curve to win paper.

That banks were willing to do so is largely a matter of tax. When the Republic normally issues bonds in the domestic market, investors are paid net of tax, meaning they receive the coupon minus witholding tax and income tax. This time round, the bonds were paid gross of tax and under domestic law, investors that have a negative tax position do not have to...

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