PH bond market growth picks up

The Philippine bond market’s growth picked up in the third quarter amid more issuances from the government and the central bank, the Asian Development Bank (ADB) said.

The local currency (LCY) bond market grew by 1.8% quarter on quarter to PHP 11.66 trillion or USD 210 billion in the July-September period, ADB’s Asia Bond Monitor report released on Monday showed, faster than the 1.3% expansion seen in the second quarter. Year on year, the bond market grew by 6.5%.

The Philippine bond market’s quarter-on-quarter (q-o-q) growth was the fourth slowest among the seven markets in the emerging East Asia region that expanded last quarter. Hong Kong’s bond market recorded the fastest quarter-on-quarter growth at 5.1%, while Japan’s posted a 0.1% contraction.

Outstanding central bank securities grew by 44.8% quarter on quarter to USD 12 billion “as issuance increased during the quarter to mop up excess liquidity in the market brought about by the BSP’s (Bangko Sentral ng Pilipinas) reduction of the reserve requirement ratio (RRR) and the expiration of pandemic-related relief measures on June 30,” the ADB said.

In June, the BSP cut the RRR for big banks and nonbank financial institutions with quasi-banking functions by 250 basis points (bps) to 9.5%. It has also reduced the ratio for digital banks by 200 bps to 6% and by 100 bps for thrift banks, and rural and cooperative banks to 2% and 1%, respectively.

“Growth of 14.3% q-o-q in the issuance of central bank securities was buoyed by the new 56-day BSP bill that was launched on June 30 as an additional tenor under the BSP Securities Facility to effectively manage changing liquidity conditions in the economy,” it added.

Meanwhile, outstanding Treasury and other government bonds rose by 0.3% to USD 171 billion, slower than the 2.3% growth the prior quarter, “as the government failed to meet its borrowing plan for the quarter due to investors’ demand for higher yields,” the multilateral lender said.

Issuances of Treasury and other government papers rose by 2.5% quarter on quarter, the report showed.

“Meanwhile, the corporate bond stock contracted 2.4% q-o-q to a size of PHP 1.6 trillion, driven by reduced issuance during the quarter. Total corporate bonds outstanding were dominated by the property sector with a 31.9% share of the total LCY corporate bonds outstanding in Q3 2023,” the ADB said.

It said “elevated borrowing costs pushed corporate bond issuance to contract 38.8% q-o-q, or 68.5% compared to the same period in the previous year,” with only three companies tapping the bond market for financing.

Meanwhile, emerging East Asia’s bond market grew by 2.5% quarter on quarter to USD 23.51 trillion in the three months through September, faster than the 2% increase seen in the second quarter.

Year on year, the emerging East Asian region’s bond market expanded by 8.2%. — AMCS