Philippine bonds are the most vulnerable in emerging Asia to a hawkish Federal Reserve, according to an analysis by Bloomberg.
The nation’s sovereign debt was the worst performer in the region during the two most recent episodes of Fed tightening, namely those that began in 2017 and 2022. Philippine 10-year yields climbed by an average of 152 basis points during those periods — nearly four times as much as those of second-placed India.
Philippine bonds have been sold off this year as energy prices have soared and US Treasury yields have climbed, while a strengthening dollar has lured funds away from peso-denominated assets. The prolonged conflict involving Iran is also weighing on the nation’s sovereign debt by keeping oil prices and inflation elevated.
“Higher US yields could continue to exert upward pressure on Philippine bond yields, particularly at the longer end, while also weighing on the peso,” said Rong Ren Goh, a fixed-income portfolio manager at Eastspring Investments in Singapore. Other headwinds for the bonds include “persistent inflation, peso weakness and uncertainty” over the final level of the Philippine central bank’s policy rate, he said.
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