PHL bond market second-fastest growing in emerging East Asia

THE PHILIPPINES was the second-fastest growing bond market in the first quarter as government and corporate issuances continued to expand due to strong liquidity, the Asian Development Bank (ADB).

The June issue of ADB’s “Asia Bond Monitor” report released on Wednesday showed that the Philippines was the second-fastest growing bond market in emerging East Asia next only to Indonesia. The sub-region consists of China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam.

Outstanding bonds issued by the Philippines climbed eight percent in the first quarter from the preceding three months to $125 billion (P6.588 trillion), fueled by an 8.8% increase in government-issued notes to $99 billion (P5.203 trillion) and a 5.4% rise in corporate bonds to $26 billion (P1.385 trillion).

Year-on-year, total bonds outstanding in the first quarter expanded by 17.8% — with government issuances climbing 16.2% and corporate bonds rising 24.4%. The local market also logged the second-fastest growth from the previous year after Indonesia’s 18.7%.

“The government took advantage of improving market sentiment and issued nearly triple the amount of bonds in Q1 2019 than in Q4 2018. The corporate bond segment also contributed to the overall growth, although at a lesser extent,” the Manila-based multilateral lender said.

Broken down, of the Philippines’ outstanding local currency (LCY) government bonds, Treasury bills rose 22.9% quarter-on-quarter to $12 billion (P608 billion), while Treasury bonds climbed 7.2% to $87 billion (P4.562 trillion).

A total of P674.7 billion in peso-denominated bonds were issued by the government in Q1 2019, up from P247.2 billion the previous quarter driven by the P235.9 billion worth of five-year retail Treasury bonds (RTB) issued in March.

“Responding to high demand, the BTr (Bureau of the Treasury) utilized its tap facility in January to issue more than the programmed auction amounts for Treasury bills and bonds,” the ADB said.

“The government is still flush with cash due to strong demand for RTBs in March and after it adjusted its borrowings, confident that it remains on track to meet all 2019 financing needs,” it added.

In January, the Philippines also raised $1.5 billion from the sale of 10-year global bonds.

Meanwhile, as of March, the top three sectors in terms of peso-denominated corporate bonds outstanding were banking (P458.3 billion or 33.1% of the total), property (P352.8 billion or 25.5%), and holding firms (P257.6 billion or 18.6%).

In the first quarter, P59 billion in LCY corporate bonds were issued, down 54.9% quarter-on-quarter.

“Uncertainties in local and international financial markets continued to affect market sentiments, leading to only a few companies issuing LCY corporate bonds during the quarter,” the ADB said.

Despite growing faster than most of its peers, the Philippines continued to be the second-smallest bond market in emerging East Asia, only beating Vietnam’s $51 billion. In contrast, the biggest issuers as of March were China ($11.325 trillion), South Korea ($2.007 trillion), and Thailand ($399 billion). — KANV