With roughly ₱3 trillion worth of Philippine government bonds eligible for their first-ever inclusion in JPMorgan Chase & Co.’s emerging-market (EM) index, the landmark entry is expected to broaden the country’s investor base and help lower borrowing costs, although only approximately ₱308 billion can be invested through the influential index.

National Treasurer Sharon P. Almanza told reporters last Monday, Aug. 17, that only a tenth of the eligible peso-denominated bonds can be placed in the index. “The amount they can invest is around $5 billion.”

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. earlier said that JPMorgan has picked nine different government securities (GS) that would be included in the index, carrying a 1.78-percent share of the pool.

Explaining this ceiling is the national government’s (NG) offshore borrowing plan of ₱915 billion, two-fifths of which will come from bond sales and other inflows. The state intends to raise the bond issuance and other inflows for next year by 16.4 percent from ₱314.4 billion.

Taking up the remaining three-fifths of the offshore borrowing program are program loans and project loans at ₱366 billion and ₱183 billion, respectively, with program loans trimmed from this year’s ₱403.8-billion plan while project loans are raised from ₱97.4 billion.

To avoid incurring expensive debt servicing costs, the government’s borrowing program will concentrate on the domestic capital market, maintaining a 77-percent share in the borrowing mix, while the remaining 23 percent will be sourced externally.

Recall that the government wrapped up its external borrowing spree in June after raising $5.25 billion through foreign currency-denominated bond issuances, including a $2.75-billion triple-tranche United States (US) dollar offering in January and a $2.5-billion triple-tranche issuance in June.

As of end-June, the country’s gross debt stood at ₱1.82 trillion, 14.5 percent higher than the ₱1.59 trillion raised in the same period last year, and ₱860 billion away from the sovereign’s full-year gross target.

British banking giant Barclays earlier priced the country to still raise an additional $2 billion in foreign debt by year-end to help finance the record ₱6.793-trillion 2026 national budget and sustain state spending.

Almanza told Manila Bulletin on Thursday, Aug. 20, that investor demand will dictate whether or not the Bureau of the Treasury (BTr) will award retail treasury bonds (RTBs) comparable to the ₱425.6 billion raised through the same instrument a year ago.

“We don’t expect the same volume, but it will depend on the demand for new money,” Almanza said, noting that the BTr will be guided by the borrowing needs for the year.

Almanza said RTBs can always secure investors, but her latest assessments point to the renewed pressures tied to the United States (US)-Iran war still weighing on domestic market sentiment.

“There will always be a market for RTBs, particularly with maturities coming due this year,” Almanza said. “The domestic market remains liquid, although market sentiment is still affected by geopolitical tension in the Middle East, as well as developments in the global financial market, particularly the US Treasury.”

Local analysts noted that the expiry of the two-month US-Iran peace deal rattled the market again, as reflected in the peso hitting another intraday record low last Wednesday, Aug. 19, at ₱61.995 per greenback.

Almanza said the government is monitoring these developments to decide whether it will issue RTBs in the same quarter as in 2025. She maintained that the issuance of the IOUs will be carried out in the second half of 2026.

Citing still-elevated interest rates, Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), believes the BTr should stand still and wait until borrowing costs ease.

Ricafort told Manila Bulletin that yields are hovering at multi-year highs, making domestic borrowing extremely costly. He recalled that the issuance of RTBs in 2025 was well-timed, given the policy easing cycle, allowing the state to lock in debt at affordable levels.

“Now, the timing is bad, especially as yields are at cycle highs—the price is at its highest since 2022. It’s expensive,” he said, but assured that rates will eventually moderate, suggesting the government “would rather wait.”

For Ricafort, the inclusion of peso bonds in the JPMorgan index is the saving grace that the Philippines could hold onto, as this will allow the government to borrow at lower overall yields.

“We’re just lucky because we have JPMorgan and the EM bond inclusion, which will drive yields lower. That’s what they need to wait for,” Ricafort said. He cautioned, however, that the government should hedge “as a matter of prudence” and calculate where the geopolitical wind blows.