Debt spreadsnarrow in Q1

MANILA, Philippines - The cost of borrowing from abroad continued to decline in the first quarter amid strong local firms’ earnings report, the Bangko Sentral ng Pilipinas reported yesterday.

In a report, the central bank said the Emerging Markets Bond Index (EMBI) + Philippine spreads averaged 142 basis points in end-March, lower than the 150 bps recorded in end-2013.

“Debt spreads initially climbed in first quarter 2014 as US tapering moves reduced the preference for Philippine bonds,” the BSP said.

“However, widening pressures abated due to easing geopolitical concerns in Ukraine, growth uptick in the Euro area, and strong local corporate earnings report,” the central bank said.

The US Federal Reserve in December announced the start of its reduction in its massive monthly purchases of US Treasuries and mortgage bonds, following improvements in the US economy.

Last week, the US central bank cut its bond-buying program by another $10 billion to $35 billion, as the Federal Open Market Committee said it “will likely reduce the pace of asset purchases in further measured steps at future meetings.”

The BSP report also showed the country’s credit default spread (CDS) went up to an average of 111 bps in the first quarter from 105 bps in end-2013.

The central bank noted the Philippine CDS spread was lower than Indonesia’s 208 bps in the same period, Thailand’s 146 bps, and Malaysia’s 110 bps.