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27 Mar 2013
Forex Flash: Philippines government bonds to rally following Fitch upgrade – ANZ
FXstreet.com (Barcelona) - According to Strategist Irene Cheung at ANZ, “We expect Philippine government bonds – both local currency and hard currency bonds - to continue to rally. We continue to suggest investors stay long 20y bonds.” The primary beneficiary of the rating upgrade will be the sovereigns’ hard-currency bonds, followed by local currency government bonds.
Most passive and index based investors typically increase their allocations when at least two rating agencies give an investment grade (IG) rating. “We believe this, coupled with recent statements, which indicate potential dollar debt issuance to be limited in the near term, could result in a rally in USD debt.” she adds.
Investors may point out that Indonesian local currency government bonds have not outperformed since February 2012, after Fitch and Moody’s upgraded the country to investment grade in December 2011 and January 2012 respectively. We believe the stall in the Indonesian bond rally has primarily been a result of the deterioration in current account (as well as the government’s inability to hike fuel prices).
Most passive and index based investors typically increase their allocations when at least two rating agencies give an investment grade (IG) rating. “We believe this, coupled with recent statements, which indicate potential dollar debt issuance to be limited in the near term, could result in a rally in USD debt.” she adds.
Investors may point out that Indonesian local currency government bonds have not outperformed since February 2012, after Fitch and Moody’s upgraded the country to investment grade in December 2011 and January 2012 respectively. We believe the stall in the Indonesian bond rally has primarily been a result of the deterioration in current account (as well as the government’s inability to hike fuel prices).