Government boosts bond market growth in third quarter

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Louise Maureen Simeon – The Filipino Star

November 27, 2021 | 00h00

MANILA, Philippines – The national bond market rose 20% to 9.76 trillion pesos in the third quarter, fueled by government-led issuance as the state increased borrowing and the budget deficit continued to widen , the Asian Development Bank (ADB) based in Manila) mentioned.

According to the latest Asian Bond Monitor, total outstanding local currency bond issues in the Philippines stood at 9.76 trillion pesos at the end of September, up 20% from a year ago. year.

It is also a 4.4% improvement from 9.35 billion pesos in the second quarter.

During the period under review, government bonds amounted to 8.32 trillion pesos, which represented more than 85% of the local bond market.

This is largely supported by the issuance of more Treasury bonds at 6.88 trillion pesos, thanks to higher volume of bond offerings and higher sales during the quarter.

The Bangko Sentral ng Pilipinas has also contributed to the expansion of the size of the government bond market, with its stock of securities surging 780% to 440 billion pesos from just 50 billion pesos in the same period of the year. last.

The government plans to borrow 3 trillion PPPs this year to finance its growing budget gap in response to COVID-related relief measures and associated economic stimulus packages.

The local bond market has also seen yields rise and the AfDB has said this could be due to some uncertainty in the national economic recovery, which has led investors to demand a premium for the associated risks.

“Persistent high inflation could temper the recovery by discouraging consumer spending due to a weak labor market,” AfDB said.

“As its vaccination rate improves, the Philippines has remained among the lowest in the region in terms of the percentage of the population vaccinated, making them vulnerable to economic setbacks,” he said.

On the other hand, the stock of corporate bonds fell 12% to 1,440 billion pesos on an annual basis. It took 14.7% of the domestic bond market.

It also saw a decline of 5.1% per quarter due to bond maturation amid low volume of issuance during the period.

Local bonds in circulation from the top 30 corporate issuers reached Pesos 1,280 billion, or nearly 90% of the overall corporate bond market.

By sector, banks still accounted for the largest share at 38.6% at 530 billion pesos. By issuer, BDO Unibank Inc. tops the list with 109.9 billion pesos.

In the emerging East Asian region, local currency bond markets reached $ 21.7 trillion at the end of September, although rising global inflation and a change in US monetary policy weakened markets. regional financial conditions.

Emerging East Asia includes China, Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

The AfDB said bond yields rose, currencies weakened and risk premiums rose slightly amid heightened global inflation and the US Federal Reserve’s announcement to limit bond purchases to from November.

“Central banks in the region may find they need to be less accommodating in controlling inflation and keeping up with changes in US monetary policy,” said Joseph Zveglich, acting chief economist of the ADB.

“That said, the possibility of another ‘tantrum’ is limited as the direction of the Federal Reserve’s position is clearly communicated and the region’s economic fundamentals remain strong,” he said.


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