Bond market grows at faster pace in Q1

MANILA, Philippines —  The Philippine bond market expanded at a faster pace in the first quarter than the previous three-month period, fueled by the increase in government issuances, according to the Asian Development Bank (ADB).

In a report, the ADB said the Philippines’ local currency bond market rose by 2.2 percent to P12.3 trillion ($219 billion) in the first quarter from a year ago.

The 2.2-percent growth in the  first quarter   is faster than the one-percent increase in the fourth quarter of last year.

On a year-on-year basis, the Philippine bond market went up by 6.4 percent in the first quarter.

The ADB attributed the growth in the bond market in the first quarter to the higher issuance of the government and the Bangko Sentral ng Pilipinas.

It said treasury and other government bonds outstanding increased  by 2.7 percent  while central bank securities rose by 20.2 percent  in the first quarter.

Meanwhile, corporate bonds continued to decline in the first quarter, tumbling by 8.2 percent due to a large number of maturities and a low volume of issuance during the review period.

Local currency bond issuance rebounded as it posted a 37-percent growth to  P3.1 trillion from January to March compared to a year ago,  reversing a 4.4-percent contraction in the fourth quarter of 2023.

“The increase in overall issuance was largely driven by Treasury and other government bonds, which issuance expanded by almost threefold to P1.2 trillion from the previous quarter’s P400 billion, as the government frontloaded its issuance for the year,” the ADB said.

Issuance of government bonds in the first quarter was also supported  by the sale of retail treasury bonds in February amounting to P585 billion.

On the other hand, corporate bond issuance slid  by 0.1 percent  during the first quarter, with only BDO Unibank Inc. and Filinvest Development Corp. tapping the bond market due to elevated interest rates.

Banks and investment houses, as well as contractual savings institutions and tax-exempt institutions remained the primary holders of local currency government bonds as of end-March, with a combined share of about 80 percent of the total local currency government debt stock.

Banks and investment houses remained the dominant single investor group, accounting for a 47-percent share, followed by contractual savings institutions with 31.4 percent.

The ADB also said sustainability bonds accounted for 72.5 percent of the Philippine economy’s total sustainable bonds at the end of March, with the bulk denominated in foreign currency and having a tenor of over five years.

With the resumption of corporate bond issuances, the amount of sustainable bonds outstanding picked up by two percent  in the first quarter to $8.5 billion, with more than half coming from the corporate sector.

In emerging East Asia, which covers the Association of Southeast Asian Nations members, as well as China, Hong Kong and South Korea, the local currency bond market expanded at a slower rate of 1.4 percent to $24.7 trillion in the first quarter   from the previous quarter’s 1.8 percent growth due largely to the contractions in government bond issuances in China and Hong Kong.