Philippines bonds enter final review for J.P. Morgan’s EM index

MANILA, Philippines — The Philippines has entered the final review stage for possible inclusion in J.P. Morgan’s widely tracked Government Bond Index for Emerging Markets (GBI-EM), a move expected to draw more foreign investors into peso-denominated bonds and lower borrowing costs.

In a report issued on Sept. 12, J.P. Morgan placed Philippine government securities on its positive watchlist, marking the last step before a potential upgrade to the GBI-EM Global Diversified Index.

A decision is expected within six to nine months, with results likely by the first quarter of 2026.

Should the Philippines be included, peso bonds will account for around one percent of the GBI-EM Global Diversified Index. For potential inclusion in the index are Philippine government bonds issued from 2023 with tenors up to 20 years.

J.P. Morgan said its decision followed “proactive market reforms” that have improved access and liquidity in the domestic debt market in recent years.

These include the revival of the repurchase (repo) market, the development of the Philippine peso interest rate swap market and streamlined tax treaty procedures.

Access to Philippine bonds via Brussels-based clearing house Euroclear, coupled with the government’s strategy of consolidating benchmark tenors through reissuance of bonds, has also made peso securities more attractive to global investors.

As a result of these changes, foreign ownership of peso government bonds has more than doubled to 5.2 percent as of June from just 1.8 percent in 2021, according to J.P. Morgan.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said the development highlights the progress of the country’s capital market reforms.

“Getting on the positive watchlist is a testament to the work the government and financial market leaders has done especially in the last few years to expand our capital markets, particularly our local bond market. This news serves as further impetus to execute more changes and reforms,” Remolona said.

While the country has long tapped global investors through dollar-denominated bonds, index inclusion would broaden access to its peso debt market, the central bank said.

Still, J.P. Morgan noted that investors are looking for further improvements in secondary market liquidity and the easing of tax hurdles.