Local currency bond market slips

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    The Philippines’ local currency (LCY) bond market as of end-September posted a slight decline from the previous quarter as the government reduced its programmed borrowings, followed by the delay in the passage of the 2019 budget which resulted to underspending earlier this year, a report released by the Asian Development Bank (ADB) yesterday said.

    According to the ADB’s latest Asia Bond Monitor report, the LCY bonds outstanding in the Philippine market marginally declined 0.1 percent quarter-on-quarter (q-o-q) to P6.69 trillion at the end of September, from P6.71 trillion at the end of June.

    This was driven by a 0.7 percent q-o-q decline in government bonds outstanding to P5.3 trillion, the ADB said.

    The bank pointed out the government scheduled a lower volume of issuance in the third quarter of 2019 since it had raised sufficient funds in the previous quarters.

    “Total issuance of government bonds fell to P273.4 billion in Q3 2019 from P312.4 billion in the previous quarter, primarily due to the lower planned auction schedule for the quarter by the Bureau of the Treasury (BTr),” the ADB said.

    “The BTr stated that the smaller borrowing program resulted from government underspending in the first half of 2019, given the delay in the passage of the 2019 budget.

    The government also had enough of a cash buffer from the large issuances conducted in the first half of 2019,” it added.

    The ADB said except for the bond markets of the Philippines and Thailand, all government bond markets in the region tallied positive q-o-q growth in the third quarter of 2019.

    Meanwhile, corporate bonds outstanding rose 2.1 percent q-o-q to P1.4 trillion at the end of September.

    “Corporate bond market growth moderated from 2.3 percent q-o-q in the previous quarter due to a significant decline in the volume of new issuance,” the report said.

    On a year-on-year basis, bond market growth in the Philippines eased to 15.7 percent in the third quarter 2019 from 16.8 percent in the second quarter.

    Meanwhile, the ADB also reported that emerging East Asia’s LCY bond market posted steady growth during the third quarter of 2019 despite persistent trade uncertainties and a global economic downturn.

    LCY bonds outstanding in emerging East Asia reached $15.2 trillion at the end of September. This was 3.1 percent higher than at the end of June.

    “The ongoing trade dispute between the People’s Republic of China (PRC) and the United States and a sharper-than-expected economic slowdown in advanced economies and the PRC continue to pose the biggest downside risks to the region’s financial stability,” Yasuyuki Sawada, ADB chief economist, said.

    “However, monetary policy easing in several advanced economies is helping to keep financial conditions stable,” he added.

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