Philippine bonds seen outperforming Asia as inflation and war risks ease

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Philippine bonds seen outperforming

Highlights

Brandywine Global Investment Management, with $63 billion AUM, is positioned in Philippine bonds anticipating gains as inflation stabilizes and geopolitical risks ease.
Philippine 10-year bond yields have risen over 200 basis points in 2024, marking the largest increase in emerging Asia amid oil-driven inflation pressures from the Iran conflict.
The Bangko Sentral ng Pilipinas raised rates by 50 basis points in October, the most aggressive tightening in Southeast Asia, to counter imported inflation and support local bonds.

Brandywine's positioning in Philippine debt

As reported by BusinessWorld Online, Brandywine Global Investment Management already holds Philippine debt and is positioning for gains if price pressures stabilize. The $63 billion asset manager expects easing inflation to improve the outlook for local bonds, with Singapore-based portfolio manager Carol Lye saying the market could rally once inflation starts to settle.

Lye says current yield levels are very attractive, even after the market comes under pressure from higher oil prices and imported inflation tied to the Iran conflict. Brandywine, which is fully owned by Franklin Templeton, also says Philippine debt may outperform regional peers once geopolitical tensions recede.

Brandywine still has room to raise its holdings, but weak liquidity and the risk of yields moving higher are keeping the firm from buying more at this stage.

Rate outlook and regional market impact

Philippine bonds have been hit as the Iran conflict pushes up oil prices and fuels imported inflation concerns. The 10-year yield has surged by more than 200 basis points this year, the biggest increase in emerging Asia, according to data compiled by Bloomberg.

The Bangko Sentral ng Pilipinas, meanwhile, raised rates by an outsized 50 basis points in October to contain price pressures. It has been the most aggressive central bank in Southeast Asia in tightening policy since the start of the Iran war, and Lye says the BSP is doing some of the right things by acting forcefully to stop the price shock from spreading through the broader economy.

Our earlier report on Philippine sovereign bond reforms outlined plans to adopt a new pricing convention for peso government bonds from January 2027 and pursue inclusion in J.P. Morgan’s Government Bond Index-Emerging Markets to broaden foreign participation and improve liquidity. It also noted that easier trading and index-driven inflows alone won’t guarantee lower yields or stronger real-economy investment, which still depend on global rates, fiscal credibility, and deeper capital-market development beyond government debt.

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