Local investors are now looking at US dollar-denominated investments to help offset volatility and achieve good returns given the steady rise of the American currency.
Coinciding with market uncertainty associated with an election year, the Philippine peso itself has been underperforming since mid-April. The peso dropped to 47.16 against the dollar, making it the third weakest currency in Asia after the Chinese yuan’s 2.3 percent and Malaysian ringgit’s 4 percent decline.
The US dollar, meanwhile, has been steadily strengthening since 2013. The US dollar index, which measures its general value against major world currencies, is up 19 percent during this period.
“Many of our investors are now studying how they can benefit from a strong US dollar,” said Philam Life head of fixed income securities Vince Daffon. “We’ve definitely seen an increase in our US dollar-denominated PAMI Global Bond Fund and our Philam Dollar Bond Fund, for example,” he added.
Daffon said the high quality US dollar-denominated sovereign and corporate bonds had performed well and remained attractive investments, due in part to a decline in US government bond yields.
“The ten-year US Treasury yield began the year at 2.27 percent, and the 30 year US Treasury yield at 3.02 percent,” he said. “At present, the 10-year and 30-year US Treasury yield are now trading at 1.55 percent and 2.30 percent, respectively.”
Typically, lower US Treasury yields drive up bond prices and fund returns. “The PAMI Global Bond Fund has a minimum initial investment of US$5,000, while the Philam Dollar Bond Fund has a minimum investment of US$2,000. For investors looking to diversify their portfolios and take advantage of a strong US Dollar and bond market, I believe that these funds represent a solid value proposition,” Daffon said.
