Government expects P100 billion boost from bond market inclusion

MANILA, Philippines — The Bureau of the Treasury expects an additional P100 billion in inflows once peso-denominated government securities are included in a global bond index, citing early gains from higher participation in retail treasury bonds and secondary market trading in August.

National Treasurer Sharon Almanza said investor interest had picked up even before the possible index inclusion, with participation rates rising by one percentage point last month.

“We felt it already when it went from five percent to six percent in August,” she told reporters. “One percentage point, so that is around P100 billion.”

On Monday, the Bangko Sentral ng Pilipinas reported that the Philippines has entered the final review phase for potential inclusion in J.P. Morgan’s Government Bond Index for Emerging Markets (GBI-EM).

Inclusion in J.P. Morgan’s GBI-EM series is expected to draw more foreign investors into the peso-denominated bond market, boosting liquidity while lowering borrowing costs for the government and eventually the private sector.

Almanza said the government is actively promoting the implementation of tax treaties, explaining that double taxation agreements are already in place with five investors who have so far enrolled under the system.

“It’s just a matter of having them enroll. We already have some case studies. I mean, five investors have enrolled so far, so it just needs to be promoted. It’s working, they just need to go through the processes and submit the documents,” Almanza said.

She added that there are around 43 to 44 countries with which the Philippines has double taxation agreements, including major economies, but investors still need to go through the required processes.

“The priority remains, consolidation and the implementation of a primary dealer system,” Almanza said in response to the issue of liquidity in the secondary market.

For the side of Finance Secretary Ralph Recto, he said the possible inclusion in the GBI-EM could boost capital inflows, provide the state with more funds to serve Filipinos and promote local capital markets to a wider pool of investors.