Phl reports rise in int’l borrowing rates

MANILA, Philippines - The country experienced an increase in the cost of borrowing from international markets in the fourth quarter as investors await the US Federal Reserve’s rate hike.

“Bond spreads widened in the fourth quarter of 2014, indicating higher risk aversion toward Philippine sovereign debt papers,” the Bangko Sentral ng Pilipinas said in a report.

The Philippines’ five-year sovereign credit default spreads (CDS) went up to an average of 91.1 basis points in the fourth quarter from 87 bps in the previous quarter.

The BSP noted the country’s CDS traded lower than Indonesia’s 151.7 bps, Thailand’s 88.6 bps, and Malaysia’s 88.5 bps.

However, the Emerging Markets Bond Index (EMBI) + Philippine spreads fell to an average of 136 basis points in the fourth quarter from the 138.1 bps in the third quarter of last year.

“In October, expectations of higher interest rates and concern about weaker business sentiment prompted some widening in EM (emerging market) debt spreads,” the BSP said.

“With the US Fed ending its QE3 (quantitative easing) program, the anticipated tightening in US policy rates led to a decline in US bond yields. The increased demand for US Treasuries push bond yields lower, which in turn, translated to a wider yield differential against EM bonds,” the central bank said.

The US Fed ended its massive asset-buying program in October last year.

The country’s debt spreads narrowed in November last year on the back of better-than-expected earnings of domestic firms and the optimism on the country’s growth prospects, the BSP said.

“However, debt spreads started to climb in the second week of December. Falling oil prices sapped confidence in the market as oil prices dropped below $60 per barrel during the week,” the central bank said.