Philippines bond market contracts in Q3

MANILA, Philippines — The domestic bond market contracted in the third quarter of the year due to the reduction of government borrowings during the period, according to the latest Asia Bond Monitor of the Asian Development Bank (ADB).

Local currency (LCY) bonds in the Philippine market marginally declined by 0.1 percent quarter-on-quarter to $129.2 billion at the end of September from $131 billion in June. Year-on-year, however, issuances grew by 15.7 percent from $107 billion in the third quarter last year.

The contraction in the local bond market in the third quarter was brought about by the 0.7 percent quarter-on-quarter decline in government bond issuance to $5.2 billion. This was driven largely by the 15.3 percent quarter-on-quarter decline in the stock of treasury bills

Outstanding treasury bonds rose marginally by 1.3 percent quarter-on-quarter in the third quarter but bonds issued by government entities declined by 0.03 percent during the period.

 “The Bureau of Treasury stated that the smaller borrowing program resulted from government underspending in the first half of 2019 given the delay in the passage of the 2019 budget. The government also had enough of a cash buffer from the large issuances conducted in the first half of 2019,” the report said.

Year-on-year, however, government bonds registered a 14.4 percent year-on- year growth.

Outstanding corporate bonds, meanwhile grew by 2.1 percent quarter-on-quarter and 20.7 percent year-on-year to $28 billion ending September.

Banks continued to comprise the largest share of the local corporate bond market with a 37.9 percent share, larger than the 28.6 percent share ending the third quarter of 2018.

Property firms, holding firms and utility firms were the next largest holders of corporate bonds in the local market.

At the end of 2019, only 56 companies were actively tapping the bond market. The top 10 corporate bond issuers during the period were Metrobank, Ayala Land, SM Prime Holdings, BDO Unibank, SMC Global Power, San Miguel, Philippine National Bank, Security Bank, SM Investments and Petron.

Banks and investment houses remained the largest investor group in the government bond market in the third quarter while contractual savings institutions were the second-largest holders of government bonds.