Philippines may reduce US Treasury reserves after Moody’s decision

After Moody's downgraded the United States' credit rating, the central bank of the Philippines said it may consider reducing its holdings of US Treasury bonds. This was announced by the regulator's governor Eli Remolona.

According to Bloomberg, Moody's exclusion of the US from the list of AAA-rated issuers once again drew the market's attention to the country's budget deficit, which has exceeded 6% of GDP over the past two years. This week, the yield on 30-year Treasuries climbed above 5% for the first time since 2023.

Dollar-denominated assets currently comprise approximately 80% of the Philippines' foreign reserves, totaling $104.6 billion in April.

Remolona expressed doubts about the long-term status of the US dollar as a reserve currency. He said that its dominance may diminish over time. However, the US bond market remains the most liquid, the official added. Remolona said that US government securities are likely to remain an important part of the Philippines' international reserves.