THE PHILIPPINE bond market expanded faster in the third quarter as the government borrowed more funds to lessen the impact of coronavirus disease 2019 (COVID-19) on the economy, the Asian Development Bank (ADB) said on Wednesday.
The ADB’s Asia Bond Monitor report released yesterday showed the local currency bond market grew by 8.8% to P8.136 trillion ($167.8 billion) from July to September, faster than the 5.2% print in the previous quarter. Year on year, it increased by 21.5%.
The local bond market was made up of 79.9% government bonds and 21.1% corporate issues.
Outstanding government securities totaled P6.503 trillion at the end of September, up 10.1% quarter on quarter and 23.8% year on year.
“The increase in market size was supported by Treasury bills and, in particular, Treasury bonds. The Bureau of the Treasury (BTr) issued another tranche of retail Treasury bonds (RTBs) to raise more funds for the government’s pandemic responses,” the multilateral bank said.
“At the same time, the BSP (Bangko Sentral ng Pilipinas started issuing its own securities as additional instrument for its monetary policy implementation and liquidity management operations, adding to the government’s debt,” it added.
Government bond issuance grew by 65.4% to P1.106 trillion quarter on quarter after a decline of 6.9% in the previous period.
Treasury bonds issued reached P651.3 billion, more than thrice the amount in the second quarter, which ADB attributed to the issuance of RTBs in August worth P516.3 billion.
“The timing has been conducive for the government to secure a good portion of funds for its spending needs amid the COVID-19 pandemic as interest rates remain low while high liquidity in the market drew in strong demand from investors,” the bank said.
The BSP also issued central bank securities worth P50 billion in the third quarter.
Meanwhile, Treasury bill issuances amounted to P488.6 billion, declining by 17.2% quarter-on-quarter, due to lower offer volumes.
“The BTr deferred its plan to issue samurai and panda bonds in 2020 as funds raised domestically were enough to cover the government’s financing requirements. The government’s P540-billion advance credit from the BSP allowed the BTr to shelf this plan.”
On the other hand, the local corporate bond market grew by 3.8% quarter on quarter and 12.9% year on year to P1.633 trillion worth of outstanding issues.
Bond issuances by companies climbed to P126.3 billion in the third quarter from P27.6 billion in the previous three-month period.
“As the economy gradually reopened, even amid continued uncertainty from the COVID-19 pandemic, firms returned to tap the capital market to fund their business operations and recovery plans. The timing is favorable as firms can take advantage of the low interest-rate environment and abundant liquidity in the market,” the multilateral bank said.
The banking sector cornered the largest piece of the corporate bond market at 41.7% as of September. This was followed by property firms (23.8%) and utilities (14.5%).
Across emerging East Asia, the Philippine bond market logged the third-fastest growth on a quarter-on-quarter basis, behind Vietnam’s 11.6% and Indonesia’s 9.9%. The sub-region consists of China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam.
On a year-on-year basis, the country’s bond market logged the second-fastest expansion behind Indonesia’s 22.4%.
The sub-region’s bond market shrank 4.8% from 5% quarter on quarter, while it expanded 17.4% year on year. Its total bond market value reached $18.7 trillion at the end of September.
“Governments continued to issue sovereign debt to finance economic relief measures amid the economic fallout brought about by COVID-19. Meanwhile, risk-off sentiment amid the protracted economic slowdown led to weaker growth in the region’s corporate bond markets,” the ADB said. — KKTJ