BSP eyes cut in US treasury holdings

DIVERSIFYING. The Bangko Sentral ng Pilipinas is considering diversifying the country’s gross international reserves, which are invested mostly in US treasuries, because of the US debt problem.

The Bangko Sentral ng Pilipinas has found it prudent to diversify the instruments where it invests the country’s nearly $70 billion in foreign exchange reserves given the US debt problem.

The bulk of the country’s gross international reserves (GIR) are invested in US treasuries.

BSP Governor Amando Tetangco Jr. said the central bank was considering diversifying the GIR, hinting that the central bank might put more money in other investment-grade assets such as those issued by European countries and in gold.

Officials said a minimal portion of the country’s GIR has been invested in other assets such as euro-denominated securities and gold. Tetangco said that what the BSP could do was to increase their share in the country’s GIR.

Tetangco said the BSP was observing a conservative policy as far as investing the GIR was concerned. Should it invest more in other assets aside from US treasuries, those assets must also be investment-grade.

“We will find ways to diversify while there are opportunities, but diversification must observe the [BSP’s investment] guidelines,” Tetangco said.

The BSP earlier reported that as of end-June, the country’s GIR reached $69 billion, a historic high. The amount was enough to cover 10.4 months’ worth of the country’s imports and was 5.9 times the country’s foreign currency-denominated debts maturing within one year.

The Philippines’ GIR is considered healthy under international standards.

The BSP said the country’s GIR was being beefed up by remittances and foreign investments in business process outsourcing and portfolio instruments.

Concerns were raised about the GIR due to fears of a US credit-rating downgrade. Those fears were heightened last week when the US Congress could not agree on extending the US debt ceiling, a move necessary for Washington to borrow more in order to pay its maturing obligations. On Monday morning, however, the US Congress agreed on a plan to raise the US debt ceiling.