By Aaron Michael C. Sy, Reporter
THE Philippines is ready to be added to JPMorgan Chase & Co.’s local currency emerging market debt index from Jan. 29 next yr, a move that is predicted to lift foreign participation in local bond issuances and improve pricing conditions for presidency borrowing.
The inclusion will cover Philippine peso-denominated government bonds, which can enter the widely tracked Government Bond Index-Emerging Markets (GBI-EM).
Finance Secretary Frederick D. Go said the inclusion signals investor confidence within the country’s fundamentals and monetary management.
“It reflects a powerful vote of confidence in our solid fundamentals and monetary discipline,” he said in a Viber message. “This milestone will broaden our investor base, improve market liquidity and help lower borrowing costs.”
JPMorgan’s GBI-EM tracks sovereign and quasi-sovereign bonds issued by emerging markets. Philippine global peso notes were faraway from the index in January 2024 as a consequence of illiquidity concerns.
Eligible securities include Philippine peso-denominated government bonds issued from 2023 with maturities of as much as 20 years.
The Philippines was placed on “Index Watch Positive” seven months before the announcement.
A joint statement from the Department of Finance, Bureau of the Treasury and Bangko Sentral ng Pilipinas (BSP) said the choice reflects reforms aimed toward deepening bond market liquidity, expanding the rate of interest swap market, strengthening the repo market and simplifying tax treaty application rules.
BSP Governor Eli M. Remolona, Jr. said the event strengthens capital market depth and monetary policy transmission.
“It is a major step in deepening the Philippine capital markets, with significant advantages to the federal government, to domestic and global investors and to local banks and businesses,” he said. “As bonds gain more liquidity, this may help the BSP transmit monetary policy, benefiting borrowers and investors across the economy.”
The agencies said they’d proceed coordinating with regulators and market participants to align domestic trading and pricing practices with global standards.
Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said the inclusion boosts the country’s credibility in global debt markets and supports sustained foreign inflows.
“The Philippines’ inclusion within the JPMorgan Government Bond Index is a serious credibility upgrade,” he said in a Viber message. “It effectively puts Philippine bonds on the ‘must-own’ list for global investors, driving regular, long-term foreign inflows reasonably than hot money.”
“That broader investor base should steadily lower borrowing costs by compressing risk premiums and improving bond market liquidity,” he added.
He said disciplined fiscal and inflation management can be key to sustaining the advantages of the index inclusion.
Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said the move might improve demand and pricing for offshore issuances and support government funding plans.
“We can even expect increased foreign participation in onshore bonds, as index inclusion typically attracts passive and benchmark-driven investors,” he said via Viber.
The federal government raised $2.75 billion in January through a triple-tranche dollar bond issuance, consisting of $1.5 billion in 10-year bonds at 5%, $750 million in 25-year bonds at 5.75% and 5.5-year notes at 4.25%.
About $2.5 billion stays in its foreign borrowing program, with a possible issuance as early because the second quarter, in response to the Treasury bureau.