The Philippines’ local currency (LCY) bond market in the fourth quarter of 2024 shrank by a slight 0.6 percent from the preceding quarter, but grew 7.5 percent from a year earlier, the Asian Development Bank (ADB) said in a report.
The latest issue of the Asia Bond Monitor released on Thursday said the drop followed a contraction in the stock of government bonds and central bank securities.
The report showed that the total LCY debt stock was down 0.6 percent at P12.927 trillion as of end-December 2024 from P13.008 trillion at the end of the third quarter.
Year-on-year, however, the end-2024 debt stock was up by 7.5 percent from the end-2023 level of P12.025 trillion.
Treasury and other government bonds recorded a slight dip of 0.1 percent quarter-on-quarter to P10.789 trillion from P10.801 trillion in the third quarter of 2024, but compared with the year-earlier level, they recorded a 9.2 percent increase from P9.875 trillion.
Bangko Sentral ng Pilipinas (BSP) securities were also down 11.7 percent at P782.5 billion as of the fourth quarter of 2024 from P885.7 billion in the preceding quarter.
The BSP papers posted a 23 percent increase on a yearly basis from P636 billion in the last quarter of 2023.
Conversely, the ADB said that despite reducing issuances, total corporate debt stock grew by 2.6 percent to P1.356 trillion in the fourth quarter of 2024 from P1.322 trillion due to fewer maturities during the quarter.
Year-on-year, the corporate debt stock declined by 10.4 percent from P1.514 trillion.
Analyst comment
Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said the quarter-on-quarter decline was expected due to relatively lower debt maturities as markets were in holiday mode toward the end of the year.
Meanwhile, “the year-on-year increase,” he explained, “may reflect wider budget deficits toward the end of 2024 that required more borrowings, as well as some window-dressing activities by some private issuers towards the accounting year-end.”
John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, said a smaller LCY bond market could lead to tighter liquidity, which might impact price discovery and secondary market trading.
“If foreign investors perceive a shrinking LCY bond market as a sign of reduced opportunities, it could affect capital flows, but this depends on broader macroeconomic stability,” Rivera said.
“The government may adjust its debt issuance strategy in the coming months, potentially increasing bond issuances if fiscal demands rise,” he added.
