‘PH to keep US treasury holdings’

Manila— The Philippines will keep its holdings of US treasuries, which make up the bulk of the country’s foreign exchange reserves, even with the downgrading of the Triple-A credit rating of the United States.

In reaction to the credit downgrade by ratings firm Standard & Poor’s, the Bangko Sentral ng Pilipinas considered the Double-A-plus rating as still investment grade and added that US treasuries have remained to be instruments that the Philippines could invest in.

The BSP puts the bulk of its $69 billion worth of foreign exchange reserves in US treasuries. Under the investment guidelines of the BSP, the foreign exchange reserves should be invested only in investment grade and highly liquid instruments.

“For the BSP, US treasuries will continue to be within the allowable investible universe for our reserves even with the one-notch downgrade by S&P,” BSP Governor Amando Tetangco Jr. told reporters.

Tetangco said that even with the US credit downgrade, holding on to US treasuries remained prudent since these instruments have remained the most liquid and since the value of European assets have been put at risk by the debt woes in the euro zone.

“Because the US market remains the most liquid and deepest and as Europe still faces uncertainty, the US market is not likely going to experience a huge selloff even with the one-notch downgrade. Many still see the US treasury market as a safe haven,” Tetangco said.

Still, the BSP chief said the country has over the years been diversifying its foreign exchange reserves. A small portion of the reserves has been invested in other foreign, liquid assets.

“Dips in the value of US treasuries would be compensated for by earlier diversification moves,” Tetangco said.

But although the BSP would continue holding on to US treasuries, Tetangco saw the prudence of pursuing actions that would help shield the Philippines from uncertainties in the global economy that might result from the US credit downgrade.

Economists believed that the downgrade of the US credit rating could dampen the outlook on the performance of the global economy and thus drag the overall investment appetite of investors.

Tetangco said the Philippine government’s goal of gradually reducing its budget deficit should help keep confidence of foreign investors in the country’s sovereign bonds.

“It would be good to heed calls for improvements of fiscal management. The call by President Aquino to keep our fiscal house in order is most opportune,” he said.  /INQUIRER