MANILA - The Finance Department and the Japan Bank for International Cooperation (JBIC) are about to finalize a deal that would make it cheaper for the government to raise funds through issuance of yen-denominated bonds.

"They [Department of Finance and JBIC] are now ready to finalize the deal. Hopefully they can sign [the agreement] within the next few weeks," National Treasurer Roberto B. Tan told reporters after the auction of Treasury bills yesterday.

JBIC has agreed in principle to guarantee up to $1 billion in Samurai bonds as long as these will be sold within 2 years.

The planned yen-denominated bond float, which will be sold to Japanese investors, was intended to pre-fund next year’s budget. The government, however, has asked JBIC to lower its guarantee fee to make it a cheaper borrowing option.

Mr. Tan did not provide details of the agreement that will be signed but said, "we got good terms."

The size of the issuance, he added, will depend on the latest assessments of the investment banks that will underwrite the yen-denominated bond float.

"The feedback before was $500 million. If we finally decide to execute, we will get new updates from interested banks who will underwrite the deal," he said.

Mr. Tan said the government would revisit its planned issue size for a Samurai bond sale when the deal is ready. Manila previously said it may sell $500 million worth of yen bonds in the fourth quarter to pre-fund its 2010 debt needs.

"Hopefully within the next few weeks we can sign on the dotted line," Mr. Tan said on Manila’s deal with JBIC. "The transaction may take a longer time, it depends on how fast we can work, as to whether we can exercise this year or early next year."

Meanwhile, Mr. Tan reiterated that there is no need to revise the government’s borrowing plan for this year even if lawmakers have called for a P10-billion supplemental budget to augment the national calamity fund, which amounted to merely P24 million before tropical storm Ondoy hit Metro Manila and surrounding provinces on Sept. 26.

He said the Bureau of the Treasury has issued a certification last week which indicate that the government has funds amounting to P14.4 billion from the sale of natural gas from the Malampaya field off Palawan.

"We submitted it and it’s up to the President [Gloria Macapagal-Arroyo] to decide if this will be considered," he said.

Meanwhile, Finance Secretary Margarito B. Teves told Reuters that the country has received proposals from banks for a third global bond issue before the year ends to partly fund its debt needs and extra budget requirements for typhoon relief.

"We are receiving many proposals [for a global bond] right now and evaluating them as a regular practice," Mr. Teves said.

He said the global bonds may be issued ahead of a planned Samurai bond sale.

The Treasury’s announcements should bode well for those who placed their bets on peso-denominated fixed income securities, a bank treasury official said.

"Rates might go down [today]. As long as there is a reduction in debt supply, there can be easing in secondary market rates. Investors tend to go on the buy side," said the official who requested not to be named.