MANILA, Philippines – The domestic bond market continued to grow in the first quarter, reaching 10.43 trillion pula, largely driven by government-led issuance, even amid external headwinds, the Asian Development Bank said. (ADB).
Total outstanding local currency bond issuance in the Philippines reached 10.43 trillion pesos in the first quarter, up 14.3% year-on-year, according to the Manila-based multilateral lender’s latest Asia Bond Monitor.
It is also a 6.5% improvement from the 9,790 billion pesos in the last quarter of 2021.
During the period, government bonds totaled P8.91 trillion, accounting for 85.5% of the local bond market. It recorded an increase of 18% per year.
This is largely supported by the issuance of more treasury bills at 7.8 trillion pesos.
The stock of Bangko Sentral ng Pilipinas (BSP) securities also increased by almost 40% to reach 410 billion pesos. In contrast, treasury bills fell 37% to P657 billion.
The local bond market also saw bond yields rise due to rising inflationary pressures and tighter financial conditions in many economies.
The AfDB said the Philippines saw the largest increase in 10-year government bond yields in the region at 140 basis points, while its two-year yield rose 112 basis points.
Meanwhile, outstanding corporate bonds fell slightly by 4% to 1,520 billion pesos on an annual basis. It took 14.5% of the domestic bond market.
But on a quarterly basis, it saw a 6.6% improvement amid the economic reopening and as corporate issuers locked in prevailing lower borrowing rates.
Outstanding local bonds of the top 30 corporate issuers reached P1.38 trillion, more than 90% of the entire corporate bond market.
By sector, banks accounted for the largest share at 43.4% at 598 billion pesos. By issuer, BDO Unibank leads the list with 162.6 billion pesos.
In the emerging East Asia region, local currency bond markets reached $23.5 trillion at the end of March as financial conditions eased due to falling stock prices, portfolio outflows and the weakening of currencies against the dollar.
Emerging East Asia includes China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Thailand and Vietnam.
Looking ahead, the AfDB said risks to the bond market include continued inflation, rising commodity prices, slower-than-expected growth in China and the severe effects of the Russian-Ukrainian war. .
“Currency stances in emerging East Asia remain broadly accommodative, but continued inflationary pressure and the acceleration of monetary tightening by the US Fed could lead to further monetary tightening in the region,” the statement said. AfDB.
“The region’s economies will continue to recover, but growth may moderate this year,” he said.