Spreads on PH debt paper rose in Q2

The cost of borrowing from the international market rose in the second quarter as the perceived worsening crisis in Europe dampened appetite for assets in emerging market assets, including the Philippines.

The Bangko Sentral ng Pilipinas said spreads on Philippine debt paper increased in the three months to June. Data from the BSP showed that the Emerging Market Bond Index (EMBI) + Philippine spreads, which is the additional yield sought by investors on Philippine bonds over the yield on US Treasuries, averaged 209.9 basis points in the second quarter.

This was up from 182 basis points in the same period last year and the 204 basis points in the first quarter of this year, BSP data showed.

“Philippine debt spreads widened in the second quarter as the deteriorating European sovereign debt and banking crisis dampened demand for emerging market assets,” the BSP said in a report.

Moreover, the credit default swaps (CDS), the cost of insuring bonds against default, for Philippine securities registered an average spread of 167 basis points over comparable benchmark instruments. This was up from 133 basis points in the second quarter of last year and the 162.5 basis points in the first quarter of this year.

“Debt spreads widened beginning April amid reports of sluggish manufacturing activity in the euro area, adding to signs that the economic activity in the region was shrinking,” the central bank said.