Pork Shock Sets Inflation Test for Philippine Debt: SEAsia Rates


·         Philippines is only market in Asia with negative real yields

·         Central bank has multiple channels to support bonds, ANZ says


By Lilian Karunungan, Bloomberg 

February 19, 2021


Philippine bonds are coming under threat as surging pork prices drive inflation to the highest level in two years, but support from the central bank should help limit further losses.


The spike in consumer prices has pushed real yields on the nation’s 10-year debt below zero, the only market in major emerging Asian countries with a negative reading. Philippine local bonds have started the year on a weak note, handing investors a loss of 1.4% in dollar terms since the end of December, a far cry from their 19% return in 2020.


“From a real-yield valuation perspective versus regional peers, peso bonds would not be attractive by this metric,” said Ng Kheng Siang, Asia Pacific head of fixed income at State Street Global Advisors in Singapore. “But, that doesn’t mean peso bonds will be a significant underperformer going forward.”


Ng said the “inflation shock” may...


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