Philippines bond market grows at faster pace

MANILA, Philippines —  Growth in the Philippine bond market picked up pace in the third quarter from the previous three-month period as both government and corporate bond issuances increased, according to the Asian Development Bank (ADB).

In a report, the multilateral lender said the Philippines’  local currency bond market rose by 3.8 percent to P13 trillion in the third quarter compared to the previous quarter’s level. This growth is faster than the 1.9 percent quarter-on-quarter expansion in the second quarter.

Treasury and other government bonds went up by 3.6 percent amid the high volume of bond maturities in the third quarter.

Corporate debt stock, meanwhile, rebounded in the third quarter as it expanded by 3.1 percent from the previous quarter’s 7.7 percent contraction.

The ADB said “corporates increased their issuance after the BSP’s (Bangko Sentral ng Pilipinas) policy easing in August.”

Last August, the BSP started its easing cycle by reducing the key interest rate by 25 basis points and delivering another 25-basis-point rate cut in October, bringing the benchmark rate to six percent.

The ADB said the country’s total local currency bond issuance also rebounded in the third quarter due to lower interest rates.

Total local currency bond issuance grew by 11 percent to P2.9 trillion in the third quarter, reversing the previous quarter’s 15.7 percent contraction.

The issuance of treasury and other government bonds went up by 34 percent in the third quarter as the government increased borrowing, driven by a large amount of maturities during the period.

As borrowing costs declined, corporate bond issuance also increased more than three-fold to P165.4 billion in the third quarter from the previous quarter’s P43.1 billion.

Companies with the biggest corporate bond issuances in the third quarter are BDO Unibank Inc. and Bank of the Philippine Islands (BPI).

BDO issued a 1.5-year sustainability bond worth P55.7 billion, representing 33.7 percent of the Philippines’ total corporate issuance in the third quarter.

Meanwhile, BPI’s 1.5-year sustainability bond worth P33.7 billion accounted for 20.4 percent of the total corporate bond issuance in the July to September period.

Banks and investment houses remained the largest investor group in the country’s local currency bond market with a share of 45.7 percent in the third quarter.

In emerging East Asia, which covers the  Association of Southeast Asian Nations, as well as China, Hong Kong and South Korea, the local currency bond market grew by 2.7 percent to $26.8 trillion in the third quarter on the back of robust issuance.

Government bond issuance in emerging East Asia reached $1.3 trillion in the third quarter, while corporate bond issuance reached $975.8 billion in the same period amid rate cuts in several economies.