Philippines bond market grows 25% to P9 trillion

MANILA, Philippines — The Philippine bond market expanded by a fourth to more than P9 trillion in the second quarter as government borrowings intensified to cover a ballooning budget deficit.

Based on the Asian Development Bank (ADB)’s Asia Bond Monitor, the local bond market grew to P9.35 trillion in the second quarter from P7.47 trillion a year ago as the government borrowed more to trim the budget shortfall.

State-issued bonds jumped by nearly a third to P7.83 trillion as the Bureau of the Treasury raised its auction of Treasury bills (T-bills) and bonds (T-bonds).

T-bonds, accounting for around 81 percent of the government’s debt papers, rose by at least 25 percent to P6.35 trillion. On the other hand, T-bills increased by more than 28 percent to P1.02 trillion, while central bank securities surged to P400 billion.

Government bonds took up 42.4 percent of the gross domestic product (GDP), from 31.4 percent a year ago. Among emerging East Asian economies, state-issued bonds averaged 59.7 percent of their GDP.

“The government continued to ramp up borrowing from the market to fund its widening budget gap in response to COVID-19 and associated economic recovery plans,” the ADB said.

“Preference for safe-haven assets like government securities remained high on the back of the uncertainties brought about by the pandemic and boosted by the abundant market liquidity,” the Manila-based multilateral said.

The government’s economic team expects to sustain a fiscal deficit of P1.85 trillion, or 9.3 percent of GDP, this year, as the government bloats its spending for recovery measures, particularly the vaccination program.

Corporate bonds in the Philippines slid by nearly four percent to P1.51 trillion in the second quarter, accounting for 8.2 percent of GDP to lag behind the average of 36.5 percent in emerging East Asia. The banking sector made up 41 percent of the market, ahead of property (25.1 percent) and holding firms (13.8 percent).

Property giant Ayala Land Inc. emerged as the largest issuer of corporate bonds with P123.9 billion, followed by Metropolitan Bank and Trust Co. and BDO Unibank with P121.8 billion and P109.9 billion, respectively. Rounding up the top issuers are SM Prime Holdings with P95.7 billion and Bank of the Philippine Islands with P86.1 billion.

According to the ADB, emerging East Asia - made up of China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam - grew its bond market by about 23 percent to $21.13 trillion in the second quarter, from $17.21 trillion a year ago.