Philippine bond market grows by 13% in 3rd quarter

MANILA, Philippines — The country’s bond market grew 13.3 percent in the third quarter from a year ago, mainly due to government issuances, the Asian Development Bank (ADB) said.

The ADB’s Asia Bond Monitor report for November showed the Philippine bond market rose to P11.06 trillion in the third quarter from P9.76 trillion in the same period last year.

Compared to the P10.68 trillion in the second quarter, the domestic bond market grew by 3.6 percent.

Government issuances amounted to P9.64 trillion in the third quarter, up 15.8 percent year-on-year, and 3.9 percent quarter-on-quarter.

This was driven by the issuance of Treasury bonds, which increased by 26 percent year-on-year to P8.67 trillion in the third quarter.

“Treasury bonds continued to dominate the government bond segment and showed the largest growth during the quarter, offsetting the contraction of all three components of the government bond segment,” the ADB said.

Meanwhile, outstanding corporate bonds were down slightly to P1.43 trillion in the third quarter from P1.44 trillion in the same period a year ago.

On a quarterly basis, corporate bonds increased slightly from the P1.41 trillion in the second quarter.

The banking sector remained the largest issuer of corporate bonds in the third quarter, accounting for a 31.9 percent share.

Property firms placed second with a 29 percent share, followed by holding firms with 16.8 percent.

In emerging East Asia, the ADB said the local currency bond market grew to $22 trillion as of end-September.

It said emerging East Asia has seen a worsening deterioration of financial conditions and rising bond yields between Aug.31 and Nov.4, amid aggressive monetary tightening in advanced economies and by regional central banks to rein in inflation.

“Nearly all major emerging East Asian central banks continued to pursue monetary tightening to combat persistent domestic inflation and the impact of tightening by the US Federal Reserve,” it said.

In the Philippines, the local currency government bond yields increased across all tenors between Aug.31 and Oct. 14 of this year.

“The large uptick in bond yields across the curve was propelled by the Bangko Sentral ng Pilipinas’ (BSP) aggressive monetary tightening stance to ease rising inflationary pressure,” the ADB said.

It said the BSP has become the most aggressive central bank in the region when it comes to tightening monetary policy, as it has delivered a cumulative 300-basis points rate increase for this year, bringing the overnight reverse repurchase rate to a 14-year high of five percent.

Economists have said they expect the BSP to deliver another rate hike next month during its last rate-setting meeting for the year.

The ADB said risks to the bond market include high inflation, slower growth in China, and economic fallout from the Russian invasion of Ukraine.