Philippine bonds are the most vulnerable in emerging Asia to a hawkish Federal Reserve, according to Bloomberg analysis. The nation's sovereign debt was the worst performer in the region during the two most recent Fed tightening episodes in 2017 and 2022. Philippine 10-year yields climbed by an average of 152 basis points during those periods, nearly four times as much as second-placed India.
Philippine bonds have been sold off this year as energy prices soared and US Treasury yields climbed, while a strengthening dollar lured funds away from peso-denominated assets. The prolonged Iran conflict keeps oil prices and inflation elevated, adding pressure. "Higher US yields could continue to exert upward pressure on Philippine bond yields, particularly at the longer end, while also weighing on the peso," said Rong Ren Goh, a fixed-income portfolio manager at Eastspring Investments in Singapore.
Philippine bonds have handed dollar-based investors a loss of more than 11% this year through Thursday, while Asia's similar gauge gained 3.1%. The peso has weakened about 8% against the dollar, making it Asia's worst-performing currency after the Indonesian rupiah. Fed signals suggest further rate hikes remain possible.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing