Outstanding PH bonds up by 3.1% in the first quarter

The Philippine bond market grew faster in the first quarter versus the previous three-month period as the government frontloaded its borrowings, the Asian Development Bank (ADB) said on Wednesday.

The country’s outstanding bonds grew by 3.1% quarter on quarter to PHP 11.5 trillion or USD 212 billion in the first three months of the year from PHP 11.2 trillion or USD 201 billion, the ADB’s ​​Asia Bond Monitor report showed.

The Philippines recorded the third-fastest quarter-on-quarter (q-o-q) bond market growth in the period among emerging East Asian markets, behind Vietnam’s 5.1% and Indonesia’s 3.5%.

Year on year, the Philippine bond market grew by 9.8%.

“The LCY (local currency) q-o-q growth was driven by an expansion of government bonds amid increased issuances driven by the government’s frontloading policy. On the other hand, corporate bonds contracted 2.2% q-o-q as maturities exceeded issuances in Q1 2023,” the ADB said.

The report showed that outstanding Treasury and other government bonds stood at USD 173 billion at end-March, up by 3.4% from the quarter earlier.

Central bank papers likewise grew by 15.8% quarter on quarter to USD 10 billion, while corporate bonds declined by 2.2% to USD 29 billion.

Treasury and other government bonds made up 81.6% of the country’s outstanding debt stock as of end-March, while corporate bonds and central bank securities accounted for 13.6% and 4.8%, respectively.

Meanwhile, gross bond issuances in the Philippines went up by 24.7% quarter on quarter and 10.9% year on year to USD 50 billion (PHP 2.7 trillion) in January-March 2023.

“The Philippines’ total LCY bond issuance in Q1 2023 expanded 24.7% q-o-q to reach PHP 2.7 trillion, buoyed by the government’s issuance of retail Treasury bonds (RTBs) in February… Treasury and other government bonds accounted for 34.8% of all LCY bonds issued during the quarter,” the ADB said.

“In contrast, corporate bond issuance contracted 81.7% q-o-q in Q1 2023 amid higher interest rates. Corporate bond issuance reached PHP 23.3 billion during the quarter and comprised a 0.9% share of the issuance total. Central bank securities comprised the largest share of fixed-income securities issuance in the Philippine LCY bond market in Q1 2023, accounting for 64.3% of the total quarterly issuance volume,” it added.

It said the banking, property, and holding firms sectors dominated the Philippine corporate bond market in the period as they accounted for 80.6% of total outstanding corporate bonds at end-March.

“Among corporate issuers, only property firms and holding firms posted a q-o-q decline in their respective market shares during the quarter. The transport and telecommunications sectors remained the smallest issuers of corporate bonds with marginal market shares of less than 1.0% each at the end of Q1 2023,” the ADB said.

Meanwhile, the emerging East Asian region’s bond market grew by 2.2% to PHP 23.8 trillion in the first quarter from the prior three-month period.

“Growth was largely driven by increased issuance from the public sector. Government bonds accounted for 61.9% of the region’s outstanding LCY bonds at the end of March,” the ADB said.

“The annual growth of the region’s LCY bonds outstanding exceeded that of the United States (5.7%) and the European Union 20 (EU-20) (2.9%). In terms of overall size, emerging East Asian LCY bond market surpassed that of the EU-20 in 2020 and reached the equivalent of 66.0% of the US bond market at the end of March 2023,” it added. — AMCS. Photo by BusinessWorld.