The Philippines’ local currency (LCY) bond market reached P10.68 trillion as of end-June, according to a report released by the Asian Development Bank (ADB) yesterday.
According to the latest issue of the Asia Bond Monitor, the country’s LCY bond market expanded at a modest pace of 2.4 percent quarter-on-quarter in the second quarter of 2022 versus the 6.5 percent increase on a quarterly basis in the first quarter of the year.
“The slowdown in the quarter-on-quarter growth was due to moderating growth in the government bond segment and a contraction in corporate bonds,” the report said.
Year-on-year, the LCY bond market posted a hike of 14.2 percent.
At the end of June, the outstanding amount of LCY government bonds climbed to P9.27 trillion, with growth easing to 4.1 percent quarter-on-quarter in the second quarter of 2022, from 6.5 percent on a quarterly basis in the preceding quarter.
“The slower growth stemmed from a contraction in the stock of treasury bills and a slower expansion in the stock of treasury bonds,” the ADB said.
“On the other hand, growth in the central bank bond stock moderated, while the stock of other government bonds posted strong growth during the review period,” it added.
The outstanding amount of treasury bills dropped to P544.2 billion at the end of June, posting a contraction of 17.1 percent on a quarterly basis and 46.8 percent from the previous year’s level.
“The stock of treasury bills declined as short-term interest rates continued to rise, stemming from the BSP’s (Bangko Sentral ng Pilipinas) tightening monetary policy. Investors increasingly preferred longer maturities as yields continued to decline following the flattening of the Philippine yield curve,” the ADB said.
On the other hand, treasury bonds outstanding climbed to P8.11 trillion, with growth easing to 3.9 percent quarter-on-quarter in the second quarter of 2022 from 7.4 percent on a quarterly basis in the first quarter of 2022.
“Moderating growth in treasury bonds was due to a relatively high base in the previous quarter as the Philippine government had issued retail treasury bonds amounting to P457.8 billion in March, leading to a decline in government bond issuance in Q2 2022,” the ADB said.
The report also pointed out that treasury bond and bill sales during the quarter fell below the Bureau of the Treasury’s target of P650 billion.
Meanwhile, the ADB said the BSP continued to post strong growth in its securities to mop up excess liquidity in the market to help curb inflationary pressure.
The outstanding stock of central bank securities rose to P567.2 billion on slower growth of 38.3 percent quarter-on-quarter in the second quarter of 2022, from 57.7 percent in the prior quarter.
Meanwhile, the corporate bond market’s size reached P1.41 trillion at the end of June on declines of 7.1 percent quarter-on-quarter and 7.2 percent year-on-year.
“Corporate bond issuance during the quarter declined 40.2 percent quarter-on-quarter, with total issuance reaching P91.2 billion due to higher borrowing costs. Uncertainties in the Philippine economic outlook and policy direction also dragged down issuance volume during the quarter,” the ADB said. – Angela Celis
