Peso bond mkt reaches P4.6T in end Sept

MANILA, Philippines - The Philippine local currency (LCY) or peso-denominated bond market grew to P4.595 trillion (approximately $102 billion) in the first nine months of 2014.

Led by Treasury bills (T-bills) and corporate bonds, it grew by 2.3-percent quarter-on-quarter (q-o-q) in the third quarter of 2014. On a year-on-year (y-o-y) basis, the bond market expanded by 6.7 percent in end-September.

According to the Asian Development Bank (ADB), government securities accounted for the majority of bonds, totaling P3.84 trillion, while corporate bonds accounted for P749 billion.

Outstanding fixed-income instruments issued by the Philippine government and government-controlled companies and corporations (GOCCs) slightly increased 0.7 percent q-o-q and 2.2 percent y-o-y.

However, T-bills decreased 1.2-percent q-o-q and eight-percent y-o-y to stand at P285 billion at end-September.

The Bureau of the Treasury (BTr) rejected some of its T-bill auctions as the market continued to seek higher yields amid rising inflationary concerns and policy rate hikes.

Treasury bonds (T-bonds) increased 0.9-percent q-o-q and 3.2-percent y-o-y to P3.4 trillion. In August, BTr conducted another bond exchange program as part of its domestic liability management exercise. The total issue size of P140 billion included P122 billion worth of exchange offers from existing bondholders.

The resulting increase from this program and from bond auctions was capped, given that P55 billion worth of retail Treasure bonds (RTBs) also matured in the third quarter.

Meanwhile, fixed-income instruments issued by GOCCs remained unchanged in at P116 billion in the same period.

The ADB, in its Asian Bond Monitor report, said that in terms of issuance, the first nine months saw higher volume at P257 billion compared with P177 billion in the first semester of the year, primarily due to the P140.4 billion bond swap held in August.

“The government has programmed LCY borrowing of P135 billion through its regular auction schedule in the fourth quarter: P60 billion of T-bills with 91-, 182-, and 364-day tenors; and P75 billion of T-bonds with three-, five-, and seven-year tenors.

Total outstanding peso-denominated corporate bonds increased 11.3-percent q-o-q and 37.6-percent y-o-y to reach P749 billion. Total corporate bond issuance in the third quarter alone stood at P66.2 billion.

Seven companies issued bonds and Tier 2 notes.

SM Prime Holdings was the largest issuer in the third quarter, raising P20-billion worth of bonds, GT Capital was second with P12 billion, followed by Aboitiz Power Corp. and Security Banking Corp. with P10 billion each.

There were 53 companies that had outstanding stock of bonds as of end-September. The top 31 issuers accounted for 87.9 percent of the total amount of LCY corporate bonds outstanding at end-September.

Out of the top 31 bond issuers, only eight companies were privately held corporations and the rest were publicly listed with the Philippine Stock Exchange (PSE).

Ayala Land Inc. remained the largest corporate issuer in the country with P57.9 billion of outstanding debt at end-September. SM Investments was the next largest borrower with P41.9 billion outstanding. Ayala Corporation was in the third spot with P40 billion of outstanding bonds.

The diversity of LCY corporate bond issuers in the third quarter of 2014 was comparable with that in same period in 2013.

Banks and financial services, including investment houses, remained the leading issuers of debt in that period with 26.3 percent of the total, down from a share of 27.2 percent in 2013.

The market share of most industries remained relatively unchanged, except for real estate, which increased to 21.4 percent from 17.9 percent; holding companies, which increased to 20.6 percent from 18.6 percent; and brewery and alcoholic beverages, which decreased to 5.8 percent from 9.5 percent.

Firms from industries as diverse as electricity generation and distribution, telecommunications, and thoroughfares and tollways continued to have shares of total corporate bonds outstanding in the single-digit levels.