Gov’t working to align PHL bond pricing standards with global rules

THE GOVERNMENT is looking to align the Philippines’ bond pricing standards with international rules to boost the country’s chances of re-entering the JPMorgan Chase & Co.’s Government Bond Index-Emerging Markets (GBI-EM).

“[For the Philippines,] the withholding tax is part of the computation for premium and discount. So, we’re also trying to align with how other countries are withholding tax,” National Treasurer Sharon P. Almanza told reporters on Wednesday last week.

“There’s withholding tax (in other countries), but they don’t include it in the computation of bonds when they are issued at the premium or at the discount. So, it’s gross price. For us, it’s embedded in the price.”

She said they are working with market players on the matter as part of the government’s efforts to be included in the global bank’s GBI-EM.

JPMorgan’s GBI-EM tracks the performance of sovereign and quasi-sovereign bonds issued by emerging market countries. The country’s inclusion will need to be approved by a certain percentage of investors reviewing the index.

In September last year, JPMorgan tagged Philippine peso-denominated government bonds (RPGB) as “Index Watch Positive,” which is the final review phase for the’ country’s potential inclusion in the GBI-EM.

The bank said it will conduct its Index Watch assessment and provide updates within this quarter.

The Philippines’ global peso notes were removed from the GBI-EM in January 2024 due to illiquidity. For potential inclusion in the index are RPGBs issued from 2023 with tenors up to 20 years.

Secondary market liquidity and taxation issues were among the key concerns for Philippine bonds raised by JPMorgan.

Ms. Almanza said she is positive about the country’s re-inclusion in the index.

“There are a lot of improvements. With liquidity, we already have the tax treaty for implementation, at least for those with the tax treaty agreement. And on the Bangko Sentral ng Pilipinas’ (BSP) side, there’s the peso interest rate swap (IRS) market. So, it also helped with liquidity and the repo (repurchase) market.”

The BTr in November 2024 announced the implementation of a streamlined tax treaty procedure for the nonresident investors of government securities.

Meanwhile, the enhanced Peso IRS market began operations in November 2024 and is being handled by the Bankers Association of the Philippines to promote the development of yield curves to further support the pricing requirements of short-term credit instruments, such as loans. — Aaron Michael C. Sy