THE Bureau of the Treasury (BTr) said appetite for Philippine government securities (GS) remains upbeat, even as capital markets have seen volatility due to concerns arising from alleged corruption in state infrastructure projects.
“The GS market is actually rallying while the stock market is down. The GS market is very robust, so we haven’t seen (the impact). Even our spread is still very tight,” National Treasurer Sharon P. Almanza told reporters on the sidelines of an event on Nov. 26.
“The spread of our domestic curve vis-à-vis US Treasuries and even our RoP (Republic of the Philippines) is still very tight. Our CDS (credit default swap) is still at its tightest,” she said.
Ms. Almanza said they don’t expect the scandal to materially dampen investor sentiment on Philippine government issuances.
“I think the investigation has been progressing. So, we’re really hoping that will address some of the concerns of people, of our investors.”
The government has raised P2.08 trillion from domestic sources as of Nov. 24, close to the full-year program of P2.11 trillion, the Department of Finance said. Its weekly Treasury bills and bonds auctions have been mostly oversubscribed, leading to a steady decline in yields, and its commercial issuances have also have also seen strong demand.
Based on the 2026 Budget of Expenditures and Sources of Financing, the government plans to borrow P2.6 trillion this year, with bulk to be raised from domestic sources to minimize foreign exchange risks. This will rise to P2.68 trillion next year.
Analysts said investors see government debt as safer assets compared to stocks during times of stress.
“(There is) increased market appetite for safer or even the safest investments such as government securities amid the volatility in the local stock market in recent months,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message on Friday.
“We may see stronger demand in the short term as investors see bonds as a safer option to park money rather than equities, [and] also as investors see rate cuts happening, which may cause them to flock to bonds to lock in returns,” Oikonomia Advisory and Research, Inc. Economist Reinielle Matt M. Erece said in a Viber message.
A widening graft scandal stemming from corruption linked to government flood control works has affected Philippine economic prospects as it hit both public and household spending due to weakening confidence, with gross domestic product growth slowing to an over four-year low of 4% in the third quarter. This brought the nine-month average to 5%, putting the government’s 5.5-6.5% full-year target further out of reach.
Economic managers have said that the growth goal could be challenging to reach, but stressed that they expect public spending to pick up as they work to address governance concerns.
The softening growth outlook and fragile sentiment have also caused the Bangko Sentral ng Pilipinas (BSP) to be more dovish. In October, it delivered a fourth straight 25-basis-point (bp) cut and said it sees the need for a more accommodative policy stance to help stimulate the economy due to the impact of the corruption scandal. It has also signaled further easing until next year.
As the mess continues to unravel, domestic markets have been volatile. The bellwether Philippine Stock Exchange index earlier this month sank to an over five-year low as it fell to the 5,600 level, and only returned to the 6,000 mark this week after languishing below this line since late October.
Meanwhile, the peso also posted a new record low of P59.17 a dollar on Nov. 12 and has been trading at the P58 to P59 level in the past two months, with uncertainty regarding the US Federal Reserve’s monetary policy trajectory also contributing to its slide. — Aubrey Rose A. Inosante
