Asia round up: Philippine spreads inside US ones
No, you didn’t misread the headline. This year’s re-rating of the Philippines’ economy recently pushed short-term yields to four-year lows and even inside their US counterparts’ temporarily, according to ING. Could the unthinkable be happening? Might Asia’s perennial underachiever be about to turn the corner?
The answer is a resounding ‘yes’ according to UBS. Citing a sharp improvement in the budget deficit as a result of higher revenue collections, regional economist Jonathon Anderson believes the Philippines is “in the throes of a self-reinforcing virtuous cycle”. A stronger peso, already up 10% over the dollar this year, has reduced the debt burden and lower yields have lessened the interest burden, further reducing the budget deficit.