Philippines bond market grows 8.3 percent in Q2

MANILA, Philippines — The local bond market continued to grow in the second quarter to hit P11.7 trillion, driven by both government and corporate bonds, according to the Asian Development Bank (ADB).

The multilateral lender’s Asia Bond Monitor September 2023 report released yesterday showed the country’s outstanding local currency bonds reached P11.7 trillion in the three months to June, up 8.3 percent.

On a quarter-on-quarter basis, the domestic bond market went up by 1.3 percent.

“In Q2 (second quarter) 2023, total local currency bonds outstanding increased on expansions in both the corporate and government bond markets,” the ADB said.

Treasury and other government bonds accounted for bulk or 82.4 percent of the country’s total debt stock in the second quarter, growing by 10.7 percent year-on-year, and by 2.3 percent quarter-on-quarter.

Meanwhile, central bank securities, which had a four percent share, were down 17.4 percent in the second quarter from the same period a year ago.

Quarter-on-quarter, central bank securities contracted by 15.8 percent due to a decline in issuance amid easing inflation.

Corporate bonds, which had a 13.6 percent share in the second quarter, increased by 4.1 percent year-on-year.

On a quarterly basis, the corporate bond market went up by 1.2 percent in the second quarter, a reversal of the 2.2 percent contraction in the first quarter due to the large volume of issuances.

The ADB said the property, banking, and holding firms sectors continued to dominate the country’s corporate bond market with a collective share of 81 percent.

In terms of investor profile, banks and investment houses continued to hold nearly half or 46.7 percent of the total local currency government debt stock.

Contractual savings institutions and tax-exempt institutions, meanwhile, remained the second-largest investor group in the country’s local currency government bond market with a 31.8 percent share.

In emerging East Asia, which covers the Association of Southeast Asian Nations, China, Hong Kong and South Korea, the local currency bond market reached $23.1 trillion in the second quarter, 7.9 percent higher than the previous year.

On a quarterly basis, emerging East Asia’s local currency bond market posted slower growth of two percent in the second quarter from 2.2 percent in the preceding quarter, as many governments frontloaded issuance in the first quarter, while both government and corporate bonds were subject to sizeable amounts of maturities in almost all markets.

Citing potential financial risk associated with higher interest rates, the ADB said governments and central banks in emerging East Asia will have to remain vigilant.