Singapore-based DBS Bank Ltd. said the Philippines is facing declining investor confidence as the persistent surge in energy costs stemming from the Middle East war weighs on the government’s ability to service its debts.

Citing data on credit default swaps (CDS), DBS economists said the Philippines and Thailand have seen relatively larger gains in their CDS, ranging from 22 to 36 basis points (bps). These increases suggest rising costs of insuring sovereign debt.

An increase in CDS indicates that investors perceive a higher risk that the Philippines may not be able to meet its debt obligations.

This development parallels a broader trend, where “sovereign CDS for Dubai, Abu Dhabi, Qatar, and Saudi Arabia have all tracked higher year-to-date,” driven by persistent military hostilities between the United States (US)-backed Israel and Iran.

Among emerging market CDS, “Thailand, Indonesia, and the Philippines are more vulnerable to the US-Iran conflict,” DBS chief economist Taimur Baig and senior economist Ma Tieying wrote in a March 30 commentary.

“For the Philippines, the concern lies in its heavy dependence on energy imports,” the DBS economists said, referring to the main trigger for market anxiety.

DBS data showed that since the beginning of 2026, yields on two-year Philippine government bonds have increased by approximately 65 bps, comparable to those of South Korea.

Compared to most of its peers, however, the Philippines has posted higher yield increases—significantly above the 10-bp rise in Singapore, 18 bps in Malaysia, 25 bps in Thailand, and 45 bps in India.

This high level of sensitivity to global market volatility has led Philippine debt securities to be tagged as “high beta” bonds—assets that investors tend to avoid in favor of safe havens such as more insulated bond markets like China.

Meanwhile, Philippine bond yield growth remained slower than that of Indonesia, where yields surged by 130 bps.

Overall, DBS said, “Elevated energy, insurance, shipping, and related costs are likely to persist,” adding that price pressures “will not recede quickly.”

The Bureau of the Treasury (BTr) last week rejected all bids for its reissued three-year bonds as investors demanded significantly higher yields. The government had aimed to raise between ₱10 billion and ₱20 billion.

The average bid yield for the three-year bonds reached 6.819 percent, well above the prevailing PHP Bloomberg Valuation (BVAL) benchmark of 6.446 percent.

Meanwhile, the BTr awarded only ₱5.6 billion of its 25-year T-bonds offer, despite total bids reaching ₱13.8 billion. The government had targeted ₱10 billion to ₱20 billion for these long-dated securities, which were priced at a flat 7.4 percent—above the 7.247-percent BVAL benchmark.

From 4.75 percent in the first quarter, DBS forecasts the two-year bond yield to ease to 4.5 percent in the second quarter.

Similarly, the 10-year bond yield is expected to decline to 5.75 percent in the second quarter from six percent in the first quarter.

Both tenors are forecast to remain steady before trending upward again starting in late 2027, with the two-year yield reaching five percent and the 10-year yield returning to six percent by the end of 2027.

Despite the ongoing pressures, DBS still expects the Bangko Sentral ng Pilipinas (BSP) to keep its 4.25-percent key policy rate steady through 2027.