Philippines to join JP Morgan bond index

MANILA, Philippines — The Philippines is set to be included in the widely tracked emerging market bond index (EMBI) of JPMorgan Chase & Co. on Jan. 29 next year, a development which officials see as drawing more foreign investors to government bonds.

The country’s peso-denominated government bonds will be added to the Government Bond Index–Emerging Markets (GBI-EM) series. This will further broaden the investor base and support liquidity in the government securities market, the government said in a statement yesterday.

“It reflects a strong vote of confidence in our solid fundamentals and fiscal discipline. This milestone will broaden our investor base, improve market liquidity, and help lower borrowing costs,” Finance Secretary Frederick Go said. 

The country’s re-entry next year followed JP Morgan’s placement of Philippine government securities on its positive watchlist in September 2024. Global peso notes were removed from the GBI-EM in January 2024 due to declining liquidity.

The GBI-EM is a widely tracked benchmark that measures local-currency government bonds from emerging economies and is used by global investors as a guide for allocating funds to these markets.

Nine eligible Philippine government bonds, with a combined value of about $49 billion, are under consideration, according to a separate Reuters report. The country is projected to reach a weight of 1.78 percent in the index.

“This is a major step in deepening the Philippine capital markets, with significant benefits to the government, to domestic and global investors and to local banks and businesses,” Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said.

He added that as bonds gain more liquidity, they will help the central bank transmit monetary policy, benefiting borrowers and investors across the economy.

Remolona said the BSP will continue to work with the Bureau of the Treasury, other regulators, financial institutions and fund managers to align local trading and pricing conventions with global practices.

The government added that the re-entry was a “strong acknowledgment” from the international financial community of the positive developments in the country’s financial and capital markets, amid “active pursuit of meaningful reforms alongside robust macroeconomic development.”

“These include wide-ranging initiatives encompassing improvements in the liquidity of government bonds, development of the interest rate swap market, strengthening of the repo market and clarification and simplified application of tax treaty rules,” it said.

Meanwhile, Jonathan Ravelas, senior adviser at Reyes Tacandong & Co. said the inclusion in the market spells out a major credibility upgrade.

“It effectively puts Philippine bonds on the ‘must-own’ list for global investors, driving steady, long-term foreign inflows rather than hot money,” he said.

The broader investor base could gradually lower borrowing costs by compressing risk premiums and improving bond market liquidity, Ravelas said.