Potential inclusion of PH in JP Morgan bond index seen as positive dev’t

NEW YORK, NEW YORK – MAY 26: The JPMorgan Chase headquarters building is seen on May 26, 2023 in New York City.  (Photo by Michael M. Santiago / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

The country’s inclusion in the emerging markets bond index (EMBI) by investment bank JP Morgan Chase & Co. will potentially unlock $10 to $12 billion in new portfolio, the finance department said on Friday.

The Department of Finance said that the country is working on being included in the investment bank’s bond index after it was removed in the past years due to its declining liquidity.

“We are working with JP Morgan on the inclusion of our government securities issued in the local market in its global bond index for emerging countries local currency bond markets to encourage more participation from foreign investors,” Finance Secretary Ralph Recto told Inquirer.

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Recto added that it will potentially unlock about $10 to $12 billion in newportfolio into the government bond market.

The EMBI is used as benchmarks for bond performance in emerging markets.

A bond trader said that this development would enhance two-way liquidity, making it easier for market players to buy and sell financial products in the market.

“Such a move could attract potential inflows, potentially leading to lower borrowing costs for the Philippine government, which would benefit the economy as a whole,” the bond trader added.

Thus, the inclusion of the country in the bond index would likely lower the cost of borrowing for the government as it increases the visibility and attractiveness of the country’s bonds to global investors.

Meanwhile, National Treasurer Sharon Almanza said that as of date, there is no update yet on the development.

For the bond trader, the key criterion that the investment bank’s bond index boasts is healthy liquidity, characterized by strong two-way bid and offer quotes.

“Therefore, for a country to remain in the index, maintaining robust liquidity must be one of the essential parameters,” the bond trader added.

Meanwhile, another anonymous bond trader also welcomed the news, saying that it could be positive for liquidity in the local bond market.