Easing inflation, index inclusion hopes boost foreign flows into PHL gov't bonds

SLOWING INFLATION and the country’s potential inclusion in the JPMorgan Chase & Co.’s emerging market government bond index have boosted foreign inflows into Philippine bonds, Nomura Global Markets Research said.

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“Foreign inflows into government bonds have increased materially, reflecting a combination of factors, and authorities seem comfortable with a further rise in the share of foreign holdings,” Nomura said in a Sept. 19 note authored by research analysts Euben Paracuelles and Nabila Amani.

Bureau of the Treasury (BTr) data cited by Nomura showed that the share of foreign holdings in Philippine government securities rose to 6% at end-August, equivalent to P728.8 billion, from just 4.2% in 2024 (P454.1 billion) and around 2% in 2020 to 2023.

“We believe this pickup was driven by a combination of factors, such as declining inflation, which has allowed BSP (Bangko Sentral ng Pilipinas) to lower its policy rate substantially, as well as prospects of bond index inclusion,” Nomura said.

“Based on our discussions with authorities, we believe they would welcome a gradual rise in foreign participation to around 10%.”

Philippine headline inflation averaged 1.7% in the first eight months, below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target.