Bright prospects for Philippines’ dollar, peso bonds seen

Dollar-denominated bonds of the Republic of the Philippines will likely remain resilient despite lingering concerns over the long-term fiscal sustainability of some European Union member-countries, the Manulife Philippines said.

Manulife also sees peso-denominated bonds to remain stable in the short to medium term.

“Improving fiscal and debt dynamics, strengthening external liquidity position and continual structural formation of domestic liquidity, which is supported in part by robust remittance flows, are expected to support the demand for Philippine government bonds,” said Aira Gaspar, vice president and chief investment officer of Manulife Philippines.

“The positive outlook by Standard and Poor’s (S&P) on the country’s credit rating, which indicates a potential credit ratings upgrade, is also supportive of further improvement of the favorable sentiment on Philippine government bonds amid the negative credit rating outlook on a number of developed countries,” Gaspar added.

In December 2011, S&P revised its credit rating outlook on the Philippines from stable to positive.

Despite the positive outlook on Philippine government bonds, Gaspar cautioned that elevated oil prices could likely add to inflation pressures and undermine economic recovery.

Nonetheless, against the backdrop of sluggish growth prospects in the global economy, she expects inflation in the Philippines to remain within the target range of the Bangko Sentral ng Pilipinas.