Treasury bill, bond rates may be range-bound on BSP easing bets

May 19, 2025 | 12:04 am

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week could end mixed to track secondary market yield movements and as the market expects the Bangko Sentral ng Pilipinas (BSP) to further ease its policy stance as early as next month.

The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion each in 91- and 182-day papers and P9 billion in 364-day papers.

On Tuesday, the government will offer P30 billion in reissued 10-year T-bonds with a remaining life of nine years and 11 months.

T-bill auction rates could mirror the week-on-week decline seen for comparable benchmarks at the secondary market following dovish signals from the BSP, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills went down by 1.01 basis points (bps), 4.51 bps, and 1.56 bps week on week to end at 5.5126%, 5.6257%, and 5.6996%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data as of May 16 published on the Philippine Dealing System’s website.

BSP Governor Eli M. Remolona, Jr. said earlier this month that they are open to cutting rates by a further 75 bps this year amid cooling inflation. The central bank resumed its easing cycle in April with a 25-bp rate cut, bringing the policy rate to 5.5%.

The Monetary Board’s next meeting is scheduled for June 19.

April inflation slowed to an over five-year low of 1.4% from 1.8% in March and 3.8% a year earlier. For the first four months, it averaged 2%, at the low end of the BSP’s 2-4% annual target.

Meanwhile, the reissued 10-year bond to be auctioned off on Tuesday could see its average rate rise to track the movements of comparable secondary market and US Treasury yields as the trade truce between the US and China could give the US Federal Reserve room to keep rates steady for now, Mr. Ricafort added.

A trader said the T-bond offer could be “well received” and fetch rates ranging from 6.185% to 6.225%.

At the secondary market on Friday, the 10-year bond rose by 2.94 bps week on week to yield 6.1732%, PHP BVAL Reference Rates data showed.

The US-China deal to lower the most aggressive import tariffs between the world’s two largest economies could lessen the impact of their trade war, though the levies left in place are still steep and will leave a mark on the economy, Federal Reserve officials said on Monday last week, Reuters reported.

Federal Reserve Governor Adriana Kugler said the 90-day pause on import levies at levels that threatened to shut down bilateral trade reduces chances that the US central bank will need to lower interest rates in response to an economic slowdown.

In separate comments to the New York Times, Chicago Fed President Austan Goolsbee agreed the weekend deal would lower the impact tariffs have on the economy — for now.

The Fed’s policy-setting Federal Open Market Committee this month kept its benchmark interest rate in the 4.25%-4.5% range where it had been since December. Policymakers said they were unlikely to make a change until it was clear whether tariffs would lead to a new inflation problem, or undercut growth and pose risks to the job market that warranted a reduction in borrowing costs.

Last week, the BTr raised P25 billion as planned from the T-bills it auctioned off as total bids reached P70.345 billion, almost thrice the amount on offer.

Broken down, the Treasury borrowed the programmed P8 billion via the 91-day T-bills on tenders for the tenor reached P23.375 billion. The three-month paper was quoted at an average rate of 5.546%, 2.7 bps lower from the previous auction. Tenders accepted by the BTr carried yields of 5.5% to 5.572%.

The government likewise made a full P8-billion award of the 182-day securities as bids amounted to P29.335 billion. The average rate of the six-month T-bill was at 5.65%, down by 1.7 bps, with accepted rates ranging from 5.623% to 5.668%.

Lastly, the Treasury raised P9 billion as planned via the 364-day debt papers as demand for the tenor totaled P17.635 billion. The average rate of the one-year T-bill decreased by 4.2 bp to 5.655%, with bids accepted having yields of 5.54% to 5.72%.

Meanwhile, the 10-year T-bonds to be auctioned off this week are part of the P300 billion in new benchmark fixed-rate Treasury notes priced on April 15 and issued on April 28. The papers fetched a coupon rate of 6.375% and an average rate of 6.286%.

The Treasury is looking to raise P260 billion from the domestic market this month, or P100 billion via T-bills and P160 billion through T-bonds. — Aaron Michael C. Sy

Eco-friendly shoe brand opens first store in Manila

May 19, 2025 | 12:04 am

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Vivaia brings style, comfort, celebrity street cred

STARS like Bella Hadid, Scarlett Johansson, Aubrey Plaza, and Jenna Ortega are said to be fans of the shoe brand Vivaia, with K-pop star Jennie of the girl group BLACKPINK spotted wearing them as well. While it has already made its presence felt in the Philippines since January through pop-up stores (in Power Plant Mall and Shangri-La Plaza), it officially opened its first permanent store in SM Megamall on May 8.

Vivaia’s store occupies 92 square meters on the mall’s 3^rdfloor. There are wall-to-wall wooden shelves filled with the brand’s signature styles for flats, heels, loafers, sneakers, bags, and many more, all bathed in warm lighting. Comfortable seats invite shoppers to try on the shoes, which cost between P6,000 and P13,000.

At the entrance, the “Conscious Comfort Wall” highlights key details about Vivaia’s footwear production, from how six PET plastic bottles are recycled per pair (acquired through suppliers in the US) to the padded insole technology that makes sure the feet are well-supported.

Eira Peña, co-owner of Vivaia’s Philippine stores, talked about discovering the brand in Hong Kong in 2023.

“I used to work in corporate and I was looking for comfortable shoes I could wear to the office. I had my eye on the brand for a while, but they didn’t have it in the Philippines,” she said. “I did some research and I saw that the technology of it is really good.”

Vivaia was founded in the US in 2020 and is now present in over 60 countries. About the shoes’ comfort, Ms. Peña said, “The shoe technicians embed sneaker-like comfort into everyday wear. I feel like it’s an underserved market in the Philippines. There’s a lot of potential to serve Filipinos’ everyday conscious comfort.”

Vivaia Philippines co-owner Jeremy Go added that it’s the only brand that “brings together the two worlds of fashion and technical comfort,” making it unique.

“We do have competitors on both sides, style-focused heels and fast-fashion shoes on one hand, and walking shoes in the comfort space on the other. Uniquely, there’s no one kind of in the middle where we are, that’s melding both worlds of comfort and fashion,” he explained.

This sentiment was echoed by Ms. Peña, who maintained that Vivaia has “no direct competitors.”

WALKING THE WALK
With this, BusinessWorld tried on a few of the shoes and gave them a spin around the store, to see if Vivaia indeed blended style and comfort. Notable new designs are the trendy Cristina Ballet Sneaker Flats and round-toe Nelly Mary-Jane Flats. Those looking for boots can check out the Ryan Slip-On Chelsea Boots.

We opted for the bestseller Margot Mary Janes, available in blue, red, beige, and black — they were requested by about three-quarters of the visitors at the launch, so we had to ask for them, too. The Margot 2.0, which is a variation of the Margot Mary Janes without the buckle, but available in more colors, was also very popular.

Slipping one’s feet into a pair, one immediately feels the high-quality comfort. The simple style lends a timeless look to any outfit. Walking in them was like walking on clouds. While the shoes are machine-washable, we found it was easy to gently wipe off a dirt stain from the side of our beige pair (a plus for those who actually will use them to walk on the streets in this tropical, urban setting).

“A lot of other brands try to do this, but you can actually wear this one every day and just wash it,” said Ms. Peña. “It’s why celebrities have been loving it, because of the chic look combined with that luxury walking experience.”

Mr. Go emphasized that the shoes are sustainable, made entirely of recycled plastic material. “We work with REPREVE, a company in the US that makes sure that each bottle used in making the fabric is actually diverted from landfills. No virgin materials are used,” he said.

They added that more Philippine stores are in the pipeline, with Glorietta and SM Mall of Asia branches set to open in the next few months.

“After that, hopefully in Power Plant Mall, and maybe in Opus Mall,” Mr. Go said.

Vivaia’s first store in the Philippines so far is located in Level 3 of SM Megamall Building B, Mandaluyong City. — Brontë H. Lacsamana

First Gen eyes three more LNG cargoes this year

May 19, 2025 | 12:04 am

LOPEZ-LED First Gen Corp. is looking to secure at least three additional liquefied natural gas (LNG) cargoes this year to support the supply requirements of its gas-fired power plants in Batangas, its president said.

“For the summer, the turnaround is somewhat quick. We’re still assessing it. Maybe before the year ends, maybe another three cargoes. It depends on consumption, right?” First Gen President and Chief Operating Officer Francis Giles B. Puno told reporters last week in mixed English and Filipino.

Mr. Puno said the company expects its eighth LNG cargo delivery this month to meet the supply requirements of its Batangas gas-fired power plants.

The cargo, with a volume of 130,000 cubic meters, is expected to dock at the Batangas terminal on May 20, “coming from Middle East and Asia.”

First Gen received its seventh LNG cargo last month.

Last year, the company completed the tender and receipt of six LNG cargoes following the completion of its terminal in 2023.

These cargoes enabled the company to supply its four existing gas-fired power plants with a combined capacity of 2,017 megawatts (MW) located at the First Gen Clean Energy Complex in Batangas.

Mr. Puno said the company schedules tender timing to ensure it can accommodate the entire cargo.

“It’s all collaborative within the power users, so we have to coordinate with Meralco (Manila Electric Co.) and then we have to coordinate with the supplier. We have to know when the ship is coming [to ensure that] by the time the ship arrives, we can accommodate the entire cargo,” he said.

In 2023, its subsidiary FGEN LNG Corp. completed the interim offshore LNG terminal and entered into a five-year time charter party for its floating storage and regasification vessel, BW Batangas.

In January, FGEN LNG secured a permit from the Department of Energy to operate and maintain its interim offshore LNG terminal for 25 years.

First Gen has a total of 3,668 MW combined capacity from its portfolio of plants running on geothermal, wind, hydro, solar energy, and natural gas. — Sheldeen Joy Talavera

Moody’s tells us what we already know about US debt

May 19, 2025 | 12:04 am

S&P GLOBAL RATINGS stripped the US of its coveted AAA credit rating in 2011, and Fitch Ratings did the same in 2023. Given how the country’s finances have only worsened since, it was only a matter of time before the third major ratings firm, Moody’s Investors Service, fell in line and did the same. That moment came late Friday afternoon after markets closed for the week, when Moody’s, like S&P and Fitch, lowered the rating one level, to Aa1.

The action “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s said in a statement. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.”

To be clear, there is next to zero chance the government won’t be able to pay its creditors, and as was demonstrated after the actions by S&P and Fitch, the Treasury Department’s access to funding is determined by forces beyond some letters in a ratings report. Indeed, foreign holders about doubled their holdings of Treasuries since 2011 to more than $9 trillion and have added about $1.5 trillion to their holdings since 2023, according to the Treasury Department. The dollar remains the world’s primary reserve currency, with a 58% share, almost tripled that of the euro and its 20% share.

So although Moody’s action says next to nothing about America’s creditworthiness, it does underscore the country’s increasingly complacent attitude toward rising debt and trillion-dollar budget deficits. The US has already added about $13 trillion of debt since 2019 to support the economy through the pandemic and underwrite the agendas of presidents Donald Trump and Joe Biden, bringing the total to some $36 trillion.

Now consider the budget bill that House Republicans are trying to push through right now. The Committee for a Responsible Budget estimates the draft legislation out of the House Ways & Means Committee would add an additional $3.3 trillion of debt and boost the annual budget deficit to more than 7% of gross domestic product by 2034. As it stands, federal debt held by the public was already forecast to rise from about 100% of GDP this year to 117% by 2034, but this House bill and its tax cuts and spending increases would push the ratio to 125%.

“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.” Moody’s said. “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”

It’s not that officials in Washington don’t know all this. In May, US Treasury Secretary Scott Bessent told lawmakers that the country’s debt and deficits were on an unsustainable trajectory: “The debt numbers are indeed scary,” and a crisis would involve “a sudden stop in the economy as credit would disappear,” he said. “I’m committed to that not happening.”

And yet, the Trump administration is doing nothing to put the country on a more fiscally sustainable path beyond declaring that extending the Tax Cuts and Jobs Act from President Donald Trump’s first administration in 2017 would spur the economy and raise more revenue for the government. To Moody’s, that’s wishful thinking. “Over more than a decade, US federal debt has risen sharply due to continuous fiscal deficits,” the firm said. “During that time, federal spending has increased while tax cuts have reduced government revenues. As deficits and debt have grown, and interest rates have risen, interest payments on government debt have increased markedly.”

That last point by Moody’s may be the most important one in its action on Friday. Rising interest rates meant that the US spent some $1.13 trillion servicing its debt in 2024, almost doubling in recent years. The concern is that federal debt gets so high that tax revenue is insufficient to cover interest expense, and the government will be forced to borrow just to meet those payments — a scenario that economists refer to as a “debt bomb.”

The good news is that the US’s worsening finances have been no secret, and yet investors the world over have piled into Treasuries, the dollar, and equities. On Friday, the Treasury said foreign investors added $233 billion to their holdings of US government debt in March after adding $257 billion in February, marking the two biggest back-to-back months for purchases on record.

History provides many cautionary examples of great empires and countries that are no more because of their propensity for fiscal profligacy. And when the money spigots are turned off, the populace revolts. It’s discouraging that few in Washington are taking the issue seriously, deciding to govern in the moment rather than with an eye on the future. Just because the US is the undisputed leader in the global economy now, there’s no guarantee it will be in the future.

BLOOMBERG OPINION

Bases covered

May 19, 2025 | 12:03 am

VELO_PAGE1_KAPCOLUMN_image2 — PHOTO BY KAP MACEDA AGUILA

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Mercedes-Benz PHL enters the burgeoning PHEV domain

WHILE MERCEDES-BENZ Philippines, administered by London-based Inchcape, has long been known for its EQ line of battery electric vehicles, it recently doubled down on its electrified portfolio by unveiling a couple of plug-in hybrids: the all-new E-Class 350e and the GLC 350e.

At the recent official launch, Inchcape Country Head Alex Yap underscored that Mercedes-Benz has “made significant strides” via its electric vehicles, adding, “We are committed to driving sustainable progress forward.” He described the local market reception for EQ models as being “positive.”

In a release, Mercedes-Benz Philippines maintained that “plug-in hybrid vehicles (PHEVs) are gaining popularity in the Philippines as more people seek environmentally friendly alternatives to traditional gasoline-powered cars. These vehicles combine electric and gasoline power, offering improved fuel efficiency and reduced emissions.” Described as a “practical step toward a fully electric future,” there has been a recent rise in the number of plug-in hybrids being introduced in the country — no doubt also an offshoot of the government incentives, import duty and tax relief extended beyond fully electric power powertrains.

Priced at P5.49 million, the all-new E-Class PHEV executive sedan gets a decidedly more traditional look compared to its fully electric counterpart (EQE) which, depending on how people view the design language of the EQ line, might be a good thing. Perhaps Mercedes-Benz said as much, “The E-Class PHEV maintains the iconic elegance of the E-Class while integrating advanced plug-in hybrid technology.”

Inside, the centerpiece is the seamless, single-glass MBUX (Mercedes-Benz User Experience) Superscreen — consisting of a 14.4-inch central touchscreen and a 12.3-inch display in front of the passenger seat. Entertainment finds expression through a 17-speaker, four-exciter (structure-borne sound transducers), 730-watt Burmester surround sound system. Motivation comes from a 2.0-liter, four-cylinder mill dishing out 204hp and 320Nm, mated with a 9G-tronic transmission. The electric motor’s battery, on the other hand, offers 19.53kWh of energy.

Meanwhile, the GLC 350e, priced at P4.89 million, is said to offer the largest load compartment in its class — 1,530 liters with the rear seatbacks collapsed; 470 liters when up. Inside is the latest generation of MBUX “for a seamless digital experience,” and MBUX Navigation Plus supports intelligent route planning. It gets Wireless Apple CarPlay, Android Auto, and USB Package Plus (with second-row ports) to ensure connectivity and convenience for all occupants.

A 2.0-liter gas engine submits 204hp and 320Nm, similarly mated with a 9G-Tronic transmission. This internal combustion engine is complemented with an electric motor powered by a battery with 25.28kWh of usable energy — good for a pure-electric range exceeding 100 kilometers. The GLC PHEV gets 4Matic all-wheel drive and an off-road driving program for confidence on a “range of terrains.”

Replying to a question from “Velocity,” Mercedes-Benz Philippines General Manager Maricar Parco said, “Two years ago, Mercedes-Benz introduced the EQ line, or full-electric vehicle product range in the Philippines, and we are just building on that portfolio now with plug-in hybrids, listening to the demand of the market (now with) the best of both worlds: electric vehicles and the performance expected from the combustion engines… We are quite confident that these models will be very well accepted, and have made a decision to introduce a couple more by the second half of this year.”

Bird flu in Brazil poultry farm triggers trade bans

May 19, 2025 | 12:03 am

SAO PAULO — Brazil, the world’s largest chicken exporter, confirmed its first outbreak of bird flu on a poultry farm on Friday, triggering protocols for a country-wide trade ban from top buyer China and state-wide restrictions for other major consumers.

The outbreak in southern Brazil was identified at a farm supplying Vibra Foods, a Brazilian operation backed by Tyson Foods, according to two people familiar with the matter.

Vibra and Tyson did not immediately respond to questions.

Vibra has 15 processing plants in Brazil and exports to over 60 countries, according to its website.

Brazil exported some $10 billion of chicken meat in 2024, accounting for about 35% of global trade.

Much of that came from meat processors BRF and JBS, which ship to some 150 countries.

China, Japan, Saudi Arabia and the United Arab Emirates (UAE) are among the main destinations for Brazil’s chicken exports.

Brazilian Agriculture Minister Carlos Favaro said on Friday that under existing protocols, countries including China, the European Union and South Korea would ban poultry imports from Brazil for 60 days.

Argentina said it was suspending imports of all Brazilian poultry products until its neighbor is found free of bird flu.

Mr. Favaro said newly revised protocols with major buyers such as Japan, UAE and Saudi Arabia provide for restrictions only on shipments from the affected state and, eventually, just the municipality in question.

The outbreak occurred in the city of Montenegro in Brazil’s southernmost state of Rio Grande do Sul, the farm ministry said.

The state accounts for 15% of Brazilian poultry production and exports, national pork and poultry group ABPA said in July 2024.

BRF has five processing plants operating in the state. JBS has also invested in local chicken processing plants under its Seara brand.

State officials said the outbreak of H5N1 bird flu is already responsible for the death of 17,000 farm chickens, either directly from the disease or due to cautionary culling.

Veterinary officials are isolating the area of the outbreak in Montenegro and hunting for more cases in an initial 10 km (6 miles) radius, the state agricultural secretariat said.

Mr. Favaro, the farm minister, said Brazil was working to contain the outbreak and negotiate a loosening of trade restrictions faster than the two months agreed in protocols.

“We can calm the market and consumers, showing that other parts of the country have no risk of outbreak … and with that, get some flexibility from those countries with a total ban,” he said in a telephone interview.

Brazil, which exported more than 5 million metric tons of chicken products last year, first confirmed outbreaks of the highly pathogenic avian flu among wild birds in May 2023, but had not registered a case on a commercial farm until Friday.

Chicken products shipped by Thursday will not be affected by any trade restrictions, the minister said.

Bird flu has swept through the US poultry industry since 2022, killing around 170 million chickens, turkeys and other birds, while severely affecting production of meat and eggs.

Bird flu has also infected nearly 70 people in the US, with one death, since 2024. Most of those infections have been among farmworkers exposed to infected poultry or cows.

The further spread of the disease raises the risk that bird flu could become more transmissible to humans.

By contrast, Argentina was able to isolate a February 2023 outbreak and start resuming exports slowly the next month.

“All necessary measures to control the situation were quickly adopted, and the situation is under control and being monitored by government agencies,” industry group ABPA said in a statement.

JBS referred questions about the outbreak to ABPA.

BRF CEO Miguel Gularte told analysts on an earnings call that he was confident Brazilian health protocols were robust and the situation would be quickly overcome.

Bird flu is not transmitted through the consumption of poultry meat or eggs, the Agriculture Ministry said in a statement.

“The Brazilian and world population can rest assured about the safety of inspected products, and there are no restrictions on their consumption,” the ministry said. — Reuters

60 years of Seikos diving for time

May 19, 2025 | 12:03 am

TIME TICKS forward for Seiko’s diver’s watches as the company releases its 60^th anniversary diver’s watch, a tribute to several pieces that they have developed since they made their first one in 1965.

Timeplus Corp., which brings Seiko to the Philippines, showed off the first in a series of three new watches for the anniversary in an event at the SM Mega Fashion Hall on May 16. The new watch, the Seiko Prospex 1965 Heritage Diver’s Watch 60^th Anniversary Limited Edition, has a pattern of waves on its silver dial. The watch is now available in the Philippines, and two more sibling timepieces are expected to arrive in either June or early July, according to Karl Dy, president and chief executive officer of Timeplus Corp., in an interview with BusinessWorld.

The watch has an automatic driving system with a frequency of 21,600 vibrations per hour (that’s six beats per second), with a power reserve of 72 hours. Powered by the 6R55 caliber, it’s encased in stainless steel with a super-hard coating, with a matching bracelet of the same material. It has a curved sapphire crystal with an anti-reflective coating on the inner surface, and Lumibrite on the hands and indexes. A limited edition, there are only 6,000 pieces in the world.

Its siblings, yet to arrive in the country, are the Seiko Prospex Marinemaster Professional Diver’s Watch 60^th Anniversary Limited Edition, and the Seiko Prospex 1968 Heritage Diver’s GMT Watch 60^th Anniversary Limited Edition. On the surface, they’re differentiated from each other by their face’s colors: deep blue (almost black) for the Marimemaster and a brighter blue for the 1968 model.

However, the new Marinemaster is powered by Caliber 8L45, boasting a frequency of 28,800 vibrations per hour (eight beats per second), a power reserve of 72 hours, and 35 jewels in its make. It’s also encased in titanium, and there are only 600 pieces available, matching its water resistance at 600 meters.

The blue 1968 Heritage Diver’s watch is made of stainless steel as well, like its silver sibling, but is powered by Caliber 6R54, with a frequency of 21,600 vibrations per hour (six beats per second), and a power reserve of 72 hours, a GMT function, and an independent 24-hour hand adjustment function. It has a water resistance of 300 meters.

As we’ve mentioned, while Seiko made its first diver’s watch in 1965, they reached true technological advancement in 1975 with the first professional diver’s watch with water resistance at 600 meters, protected with a titanium case. The steps to 1975 started with a professional diver in Hiroshima writing a letter to Seiko explaining that watches available then only held up for down to 300 meters.

Since then, they’ve made more strides. As Mr. Dy told BusinessWorld, “Some watches are able to go to around a thousand meters already.”

Mr. Dy explained the importance of these watches to the market, diver or not. “The most famous watches that we’ve had so far are actually diver’s watches, in the Philippines. Because of our beautiful oceans, beautiful beaches, we really think that celebrating the 60^th (anniversary) diver’s (watch) now, here, at least one of the first globally, is actually a testament to Filipinos and their love for the Seiko Diver’s.”

On a personal note, we asked if he does go diving with a Seiko diver’s watch. “I’m just an open diver. I’m a 100-meter diver, that’s it. I’m really fully recreational,” he said. However, he did say: “I’ve been using the same Seiko watch for over 15 years.”

“It’s really a testament to the quality, and of course the performance of the diver’s watch.”

Timeplus Corp. is opening five more stores in the country next year, he told BusinessWorld. — Joseph L. Garcia

SPAVI sees better 2025 amid easing inflation

May 19, 2025 | 12:03 am

LISTED food service group Shakey’s Pizza Asia Ventures, Inc. (SPAVI) expects 2025 to be a stronger year, as the company remains optimistic about achieving its double-digit growth target, driven by easing inflation.

“We have a very cautious but already optimistic view that 2025 will be even better than the previous year. That’s why we have given a guidance of sustaining the double-digit growth for 2025,” SPAVI President and Chief Executive Officer Vicente L. Gregorio said during an online briefing last week.

“Currently, we are buoyed with the fact that we’re seeing inflation soften. The consumer found their confidence and spending has been growing bit by bit, quarter-on-quarter,” he added.

The country’s inflation rate eased to 1.4% in April, the slowest pace in more than five years, bringing the four-month average to 2%.

“As we look to the next three to five years, our mission is to keep the momentum going, aiming to sustain double-digit growth and expand our reach,” Mr. Gregorio said.

Mr. Gregorio said SPAVI sees growth opportunities in the Visayas and Mindanao regions, led by its Peri-Peri Charcoal Chicken & Sauce Bar brand.

“While we may have almost reached saturation in Metro Manila, there’s still very much healthy room for growth outside Metro Manila, especially in Visayas and Mindanao, which we’re happy with our projects there,” he said.

“One of our latest acquisitions, Peri-Peri, is beginning to stretch its legs and presence outside Metro Manila,” he added.

Mr. Gregorio also said the company is on track to open at least 430 new stores this year.

“Our store network expansion is on track, and we expect to pick up the pace in the coming quarters. We are also particularly encouraged by the continued progress of our international business — a new vertical that is shaping up to be a meaningful contributor to our future performance,” Mr. Gregorio said.

As of end-March, SPAVI had 2,671 stores in its global network. Its brands include Peri-Peri, Shakey’s, Potato Corner, R&B Milk Tea, and Project Pie.

For the first quarter, SPAVI grew its net income by 6% to P182 million. Global systemwide sales rose by 17% to P5.6 billion, led by both its domestic and international segments.

Revenue increased by 14% to P3.5 billion, while operating income grew by 15% to P285 million.

SPAVI shares were last traded on May 16, closing lower by 2.38% or 19 centavos at P7.78 per share. — Revin Mikhael D. Ochave

To win: A credible commitment

May 19, 2025 | 12:03 am

The topic of elections is understandably the talk of the town. But this essay is not about the winners of the midterm elections. Nor is it about how the antagonistic political rivals can win the 2028 national elections.

The title, “To win,” pertains to a much narrower yet crucial issue that will impact the economy and our people’s health. This is about a Bill in Congress (House Bill 11360) that will reduce the tobacco tax rates. Further, this bill will emasculate the tax structure by removing the provision in the current law for automatic annual tax increases. The automatic increase in taxes, also called indexation, is necessary to reflect real prices and make harmful cigarettes less affordable.

The House of Representatives railroaded the passage of House Bill 11360*. Despite the short timeline before the end of the 19^th Congress, the Senate leadership is bent on passing its version of the House Bill.

It is an open secret that the legislation to lower the tobacco tax rates and remove the indexation is a “done deal,” to quote insiders. And the signs are there, apart from the shameless or garapal manner that the Lower House displayed in railroading the bill’s passage. One sponsor of the House Bill even acknowledged during second reading that the bill will benefit the tobacco industry.

In the Senate, its Ways and Means Committee has called for a meeting to tackle House Bill 11360. Oddly, the Ways and Means Committee is having the meeting at a time that the Senate is not yet in formal session. That further arouses the suspicion that the Senate leadership is speeding up the approval of the bill.

In fact, Senate President Chiz Escudero mentioned in a press conference that the Senate will prioritize increasing excise tax rates on vape products.

Mr. Escudero has a record of protecting tobacco interests. The foremost example of this was exhibited during the vote for the Sin Tax in 2012. Despite his supposed close friendship with then President Noynoy Aquino and his being part of the administration’s coalition, Escudero defied Aquino’s instruction to Congress to vote for tobacco and alcohol tax reforms.

In this setting, the Chair of the Senate Ways and Means Committee, Senator Win Gatchalian, is in an unenviable spotlight. Those in civil society who vigorously oppose the House Bill are watching his every move.

Civil society is wary. Why did Senator Gatchalian call for a hearing on the House Bill when the Senate has practically no time to approve its own version of a bill? But with a “done deal” in place, nothing is impossible. Kung gusto, may paraan (if there’s a will, there’s a way).

Senator Gatchalian likewise has made an official statement that favors the tobacco industry’s position. In one hearing on illicit trade (Jan. 9), Senator Gatchalian said:

“In my opinion, enforcement is not enough. We need to look at other ways or the other causes of illicit trade in our country…. We cannot ignore the theory of incentives given the significant price difference between illicit cigarettes and legitimate ones. Aside from the enforcement, we should really think of other ways, maybe economic ways in curbing illicit grade….”

The underlying message of Senator Gatchalian’s statement is this: Find another way to fight illicit trade: Have “incentives” like the lowering of prices (taxes) to reduce the price gap between illicit and legitimate cigarettes.

Ostensibly, the pro-tobacco bill that will lower taxes is meant to combat illicit trade and therefore arrest the decline in tax revenues. It is a silly claim. Lower taxes would only mean lower revenues, even as illicit trade would continue to flourish. The illicit cigarettes are priced so cheaply (for example, P20 a pack) that registered brands could not match this even by lowering their taxes.

But Senator Gatchalian is sensitive to public opinion. He and Senate President Escudero avoid being garapal. They fear a public backlash if they are seen as unabashedly pro-tobacco. Unlike Congressmen who are ensconced in their own local fiefdoms and thus do not care about public opinion, Senators have higher political ambitions. Messrs. Gatchalian, Escudero et al. wish to protect if not burnish their reputations.

Adopting the pro-tobacco House Bill is so crass and garapal.

It would be most irresponsible, most reckless for legislators and the Executive, including the Department of Finance, to let revenues, like tobacco taxes, erode at a time that the economy is undergoing tremendous fiscal pressure. The House Bill, if passed, will contribute to a fiscal crisis. Economists, including those from the multilateral agencies, have identified fiscal consolidation as a key task in this juncture. Fiscal consolidation means increasing tax revenues and making public spending efficient and unwasteful.

It is cruel and thoughtless to pass a measure that will set back our health targets in attaining the sustainable development goals. The House Bill will further increase smoking prevalence and the incidence of preventable diseases and deaths. Expect the economic burden from smoking to get heavier.

And it is sheer hypocrisy — more, it is a lie — for the tobacco industry and pro-tobacco politicians to claim that lowering prices is the solution to rising illicit trade. In truth, tobacco companies have been jacking up their net-of-tax prices.

Let’s use the most popular brand, Marlboro, as an example. The retail price of a pack of Marlboro (20 sticks) in January 2022 was P122.68. Marlboro’s net-of-tax price (i.e., retail price minus the excise tax and the value-added tax) in the same period was P54.53. In January 2023, Marlboro’s retail price went up to P138.48, and its net-of-tax price increased to P63.54. The net-of-tax price between January 2022 and January 2023 thus had a marginal increase of P9.01. But the change in excise tax was an increase of P5. Even accounting for the minuscule incremental increase in the value-added tax, we can conclude that the tobacco industry has been increasing its price at an even higher rate than the excise tax.

Yet, even as it has raised prices higher than the excise tax increase, the tobacco industry has the gall to demand from government a lowering of the excise tax rate. That the tobacco industry can raise its net-of-tax-price higher than the excise tax is proof that there is further room for government to increase taxes.

For the reasons above, it will be terribly bad for the reputation of Senator Gatchalian and his colleagues in the Senate to approve the House Bill.

The pro-tobacco senators will have to find a creative way, a less garapal way, nay, a deceptive way, to please the tobacco industry. They will look clean by passing an acceptable bill without the egregious provisions found in the House Bill. Concretely, the Senate version of the bill will be silent on lowering the taxes of tobacco products but will harmonize the tax rates on vaporized products.

The tactical gain for the tobacco industry in this scenario is that the Senate will immediately approve the bill. Which will then be submitted to the bicameral conference committee to have the Senate and House Bills reconciled.

Here is where the “done deal” may happen. In a secretive bicameral conference committee meeting, the House version of the bill will win. The Senators who play along but wish to look clean will make the excuse that they tried their best to have a good bill, but they had to compromise to prevent a deadlock. Cunning but deceptive.

Yet, civil society is hoping that Senator Gatchalian and other senators, for the sake of their own credibility and reputation, will break away from this conspiracy. After all, Senator Gatchalian stated: (Jan. 22):

“Just to take note that we did not include the moratorium [i.e., effectively lowering tax rates] as being proposed, and the reason for that is based on the evidence and the data that we have collected, we have not seen any connection between the increase in prevalence and also illicit trade.

“So, without that evidence we are not inclined to look at that proposal” [referring to the House Bill].”

To assure civil society and the public that he, as Chair of the Ways and Means, will resist the House Bill, he must show credible commitment.

Credible commitment can be expressed in terms of the following:

1. Issue a public statement that he and the Committee will reject any provision that will effectively lower tobacco tax rates and that will remove the indexation feature of the tax structure.

2. Issue likewise a statement that in the event of convening a bicameral conference committee, he and his Senate colleagues will totally oppose the inclusion of any provision lowering the tax rate and removing the annualized indexation.

3. Demand that proceedings of a possible bicameral conference committee be made transparent. That there be a live broadcast of the meetings and proceedings of the bicameral conference committee.

4. But the best expression of credible commitment is for Senator Gatchalian to stop the hearing on the House Bill or any version that will be used to consummate a “done deal.”

Thus, the title of this piece: “To (Senator) Win: A Credible Commitment.”

* (Therese Hipol and Filomeno Sta. Ana III, “The railroading of House Bill 11360, BusinessWorld, Feb. 17)

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

BSP securities fetch lower rates

May 19, 2025 | 12:03 am

BSP-main office — Bangko Sentral ng Pilipinas main office in Manila. — BW FILE PHOTO

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) short-term securities dropped on Friday as both tenors attracted strong demand.

The central bank securities fetched bids amounting to P152.319 billion on Friday, higher than the P90-billion offer and the P137.87 billion in tenders for the same volume auctioned off in the previous week. This allowed the BSP to make a full award of both tenors.

Broken down, tenders for the 28-day BSP bills reached P59.611 billion, above the P40-billion offering and the P52.165 billion in bids for the same volume placed on the auction block a week prior. The BSP awarded P40 billion in one-month papers as planned.

Banks asked for yields ranging from 5.61% to 5.649%, narrower and lower than the 5.63% to 5.692% band seen a week earlier. This caused the average rate of the one-month securities to decline by 3.06 basis points (bps) to 5.6322% from 5.6628% previously.

Meanwhile, bids for the 56-day bills amounted to P92.708 billion, much higher than the P50-billion offering as well as the P85.705 billion in tenders for the same offer the week prior. The central bank made a full P50-billion award of the two-month securities.

Accepted rates for the two-month tenor were from 5.6% to 5.63%, down from the 5.625% to 5.675% margin seen a week ago. With this, the average rate of the securities fell by 3.49 bps to 5.6206% from 5.6555% logged in the prior auction.

The BSP said it fully awarded the short-term securities as it saw higher demand even as it kept its offer volume steady from the week prior.

“Total tenders rose to P152.319 billion from P137.87 billion in the previous week. The resulting bid-to-cover ratios were at 1.49 times for the 28-day tenor and 1.85 times for the 56-day tenor,” it said in a statement.

The central bank uses the BSP securities and its term deposit facility to mop up excess liquidity in the financial system and to better guide short-term market rates towards its policy rate.

The BSP bills also contribute to improved price discovery for debt instruments while supporting monetary policy transmission, the central bank said.

The central bank securities were calibrated to not overlap with the Treasury bill and term deposit tenors also being offered weekly.

Data from the central bank showed that around 50% of its market operations are done through its short-term securities.

The BSP bills are considered high-quality liquid assets for the computation of banks’ liquidity coverage ratio, net stable funding ratio, and minimum liquidity ratio.

They can also be traded on the secondary market. — Luisa Maria Jacinta C. Jocson

Philippines improves to its best good governance ranking in three years

May 19, 2025 | 12:02 am

The Philippines went up four places to 57^th out of 120 countries in the ﬁfth edition of the Chandler Good Government Index (CGGI) by the Chandler Institute of Governance. The index evaluates the governance capabilities and public sector effectiveness of each country by using equally weighted indicators categorized into seven pillars. On a scale of 0 to 1, where 1 is best, the country’s overall score grew to 0.519. This was the country’s best performance in three years or since its 50th placement in 2022.

Let’s talk tariff (conclusion)

May 19, 2025 | 12:02 am

VELO_PAGE2_image1_SOCCO — A worker at Toyota’s Santa Rosa Plant assembles a window panel of the Tamaraw. — PHOTO BY KAP MACEDA AGUILA

Some walk-back, some talkback

THE “TARIFF DIPLOMACY” of the United States with the rest of the world is causing upheavals in the global economy. Already, the International Monetary Fund (IMF) has cut its estimates for economic growth by half a percentage point from 3.3% to 2.8%. That is a very significant setback.

It was, therefore, very welcome news when the United States and China announced last week a 90-day reprieve on reciprocal tariffs. The US is winding down a 145% tariff on Chinese goods to 30% while China is also cutting its retaliatory tariff from 125% to 10%. Capital markets breathed a major sigh of relief, at once bouncing back to levels prior to the “Liberation Day” announcement of increased tariffs by President Donald Trump.

While the US and China have agreed to a mechanism to work out trade differences, however, the increased tariffs on autos and auto parts remain in place.

It will be noted that the US government has provided some relief for automakers. It is allowing for exemptions and rebates for certain manufacturers, particularly those investing in production in the country or complying with the United States-Mexico-Canada Agreement (USMCA). The USMCA defines stringent rules-of-origin requirements for autos and auto components. These include Regional Value content (75% of the vehicle value must originate from North America), Labor Value content (40% of the vehicle value must be produced by workers earning at least US$16/hour), Steel and Aluminum Sourcing (70% must be sourced from North America) and Core Parts Origination (engines, transmissions, and batteries must be produced within the USMCA region).

All the back-and-forth on tariffs and the flurry of high-level exchanges between governments and automakers underscore the importance of the auto industry to economies around the world. This is true not only for those producing complete vehicles but also for those producing auto components. While China accounts for only 2% of completely-built-up vehicle imports to the US, it accounted for 11.6% of auto parts imports in 2023 worth approximately US$9.9 billion. South Korea reportedly exported US$8.08 billion while Japan exports of auto components reached US$7.49 billion. Mexico was, by far, the largest exporter of auto parts to America, accounting for up to 40.4% or US$78.4 billion.

Several member-states of the Association of Southeast Asian Nations (ASEAN) also export auto parts to the United States. The biggest is Thailand which, according to a report by the Bangkok Post — citing figures from the Thai Auto Parts Manufacturers Association — exported an estimated US$4 billion to the USA in 2023. A report by World’s Top Exports cites Vietnam as the second-largest ASEAN exporter of auto parts to America with exports in 2023 reaching US$553 million. The Philippines, on the other hand, was reported by the World Integrated Trade Solution as having exported US$66 million worth of auto parts to America in 2023.

The new baseline tariff of 10% and the 25% tariff on autos and auto parts will surely give auto manufacturers pause. I believe that their first reaction would be to consolidate parts sourcing from the rest of the world to North America, taking advantage of USMCA provisions for tariff-free imports. In fact, US automakers are already going through the exercise of evaluating the economics of complying with the USMCA versus alternate ways of reconfiguring their global supply chains.

In this respect, the proposed reciprocal tariffs will hold a significant sway. This is yet another layer of the tariff diplomacy of the US — and is potentially much more devastating. If they are implemented in their current form — including the 145% tariff on Chinese goods that is now on hold for 90 days — consolidating parts sourcing in the North America region may make a lot of sense. However, it is difficult to make a definitive assessment at this time since these reciprocal tariffs are suspended until July 9, 2025 — except for China whose exemption will extend for a week or so more — and are the subject of spirited negotiations between the US and the affected countries. Since the planned reciprocal taxes vary widely from one country to another, these will have material bearing on supply-chain strategies.

A reciprocal tariff of 34% was supposed to have been imposed on China-sourced goods but this eventually rose to 145% after China reacted with tariff increases of its own on US exports to China. For now, they have been reduced to 30%. Reciprocal tariffs are also to be imposed on India (26%), South Korea (25%), Japan (24%) and the EU (20%). ASEAN countries are also included — Vietnam (46%), Thailand (36%), Indonesia (32%), Malaysia (24%), the Philippines (17%) and Singapore (10%). All these will have material bearing on whether car makers onshore or reshore auto parts manufacturing to the US.

The reciprocal tariffs are currently being negotiated with bigger countries like China, EU, Japan, and Canada holding a tougher line of resistance. Most other countries, on the other hand, are trying to negotiate for a more forgiving rate. The lower the tariff, the less trade disruption there will be. Additionally — and, perhaps, more importantly — it opens the door to a relocation of production bases to countries that are the subject of lower reciprocal tariffs.

It makes sense for the ASEAN to negotiate with the USA using its collective power. After all, a young and large population of over 600 million people with economies that are growing at a faster clip than most of the world is a strong leverage. However, this could turn out to be a very complicated — and protracted — initiative given the wide disparities in the trade flows of each of the member-countries with the US. Bilateral negotiations would probably yield the quickest results.

As it stands, the Philippines can consider itself to be in an advantageous position versus most other auto parts producing nations. This is not to mean that the Philippines will necessarily be opportunistic about the matter. After all, we have been among the most adherent to the WTO rules system in terms of free trade. However, the way the planned US reciprocal tariffs are currently structured, sheer economics will not be deterred.

Without meaning to oversimplify the matter, if auto parts from China are subjected to a 145% reciprocal tariff — which is not likely following recent pronouncements — then US car makers will likely choose to source from other countries with a lower rate. This could be any country, though, since 145% is practically a trade embargo on China. The Philippines makes for an attractive production base given that the reciprocal tariff on us is only 17%, the lowest in ASEAN next to Singapore. We can export parts to the US with a 29% tariff advantage over Vietnam, 19% over Thailand, 15% over Indonesia and 7% over Malaysia. We assume, however, that the cost of production in the Philippines is comparable to others — which is likely not the case. Or we can say that production in the Philippines can accommodate a cost penalty up to the extent of the tariff differentials. The ultimate goal, of course, is that Philippine auto parts makers must strive to attain a competitive cost structure compared to other countries; competing based on a tariff advantage is not really a sustainable growth strategy. But what the tariff advantage does is get our foot in the door.

In terms of immediacy, though, auto parts makers with built-up capacity in whichever country that has a lower reciprocal tariff than China will have the leg up on others. The investment for a new factory in the Philippines is an added cost that will need to be absorbed within the tariff differential as well — not to mention the needed lead time in the construction and startup of a new plant. Surely, however, the Philippines can compete in terms of skilled labor, quality of production, a business-friendly government, and a stable monetary policy. This opportunity might just be what local auto parts manufacturers need to break into the global supply chain.

If we can capture even a part of, say, the US$9.9-billion auto parts exports by China to the US mentioned earlier, this will be a big plus to the strengthening of the manufacturing sector in the Philippines. It will be recalled that manufacturing only contributes about 16% to 17% to our country’s GDP compared to over 60% by the service sector. The beauty of a stronger manufacturing sector is that it provides for higher levels of (local or foreign) investments, more lasting employment and — in the case of the auto industry — contributes significantly to government revenues, not to mention the increase in exports. This could be a significant step forward in the achievement of our long-term national development plans.

Secretary Frederick Go, Presidential Assistant for Investment and Economic Affairs to President Ferdinand Marcos, Jr., returned from a recent trip to the US to negotiate the impending reciprocal tariffs on the Philippines. He reported that the discussions went very well and that he is confident about finding a mutually beneficial path forward. This augurs well and might lead to a broadening of trade between the Philippines and the USA.

At the heart of trade flows is the principle of competitive advantage. Some countries are more competitive in producing car parts than they are in producing agricultural products. Therefore, we trade. However, car parts are more expensive than corn or potatoes, so a trade imbalance ensues. The imposition of tariffs is one way of managing this trade deficit and equalizing any other considerations that may distort the level playing field such as government subsidies or non-tariff barriers (e.g. technical or regulatory barriers). Ultimately, however, we need to strengthen our true competitiveness in terms of costs of production — particularly in terms of power cost, logistics, and raw material costs.

As I said, tariffs are complicated and there are too many moving parts to make a definite determination of what the outcome will finally be in this round of US tariff diplomacy. Scenario planners must be busy playing out the multitude of variables and what-if possibilities. One thing is sure, until negotiations are finalized and the dust settles, the prevailing confusion has thrown a gargantuan monkey wrench into the global economy. In the end, this is the real story of tariffs: how it will affect trade flows and the global economy. We hope the fallout will be manageable.