Foreign investments in gov’t bonds, bills declined in Q2

Foreign investments in treasury bills and bonds issued by the Philippine government remained significant in the second quarter but was lower than the year-ago level as low interest rates pushed investors to buying equities.

The Bangko Sentral ng Pilipinas said inflows of foreign portfolio investments into the country had grown substantially this year, boosted by the favorable economic-growth performance of the Philippines and other emerging markets compared with how industrialized countries fared.

Investor appetite was tilted more toward equities than government securities as yields on the latter was on a decline.

Officials said the drop in yields of T-bills and bonds, which translated to lower cost of government borrowings, was attributed partly to perceptions of the improved credit worthiness of the country.

Data from the BSP showed that purchases by foreign investors of Philippine government securities reached $617 million in the second quarter, down by 17 percent from $748 million in the same period last year.

This came as spreads on Philippine debt papers dropped. The EMBI [emerging market bond index] + Philippine spreads, which is the additional yield investors get for purchasing securities from the Philippines (both issued by the government and the private sector) instead of US treasuries, averaged 182 basis points in the second quarter. This was lower than the 216 bps registered in the same period last year.

In June, Moody’s Investors Service upgraded its rating for the country from three to two notches below investment grade. Fitch Ratings also raised its rating for the country from two notches to just a notch below investment grade.