The PHL bond market continues to grow in the first quarter

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The Philippine bond market saw the fastest quarter-over-quarter growth in emerging East Asia in the first three months of the year thanks to increased government borrowing to finance its deficit and its response to the pandemic, the Asian Development Bank (ADB) announced on Friday.

The June issue of the AfDB’s Asia Bond Monitor showed that the country’s bond market has experienced the fastest expansion in the sub-region, which is made up of the Philippines, China, Hong Kong, Indonesia, Malaysia, Singapore, South Korea, Thailand and Vietnam.

Outstanding bonds rose 6.5% to $ 188 billion in the first quarter, from $ 178 billion in the fourth quarter of 2020. This is the fastest rate in the region, followed by Indonesia. by 6.2%.

“Quarterly growth accelerated from 5.3% qoq in the fourth quarter of 2020, driven entirely by the general government segment as the business segment experienced a contraction during the quarter,” AfDB said. .

Meanwhile, the local bond market rose 28.4% from the $ 140 billion recorded in the first quarter of 2020. It was the second fastest impression in the region after Indonesia’s 36%. .

Broken down, government bonds made up 82.7% of total issuance in the first three months of 2021, while corporate bonds made up the remaining 17.3%.

AfDB data showed that the stock of government bonds reached $ 155 billion in March, an increase of 8.4% from $ 145 billion in the last three months of 2020. It has also increased 36.5% from $ 109 billion a year earlier.

“Treasury bills and Treasury bonds were the main contributors to this increase, as the government continued to borrow heavily in the local market for its COVID-19 (2019 coronavirus disease) relief efforts and to support the economic recovery, ”the multilateral lender said.

Meanwhile, outstanding corporate issues stood at $ 33 billion in the first quarter, down 2% from the $ 34 billion recorded in the previous three-month period.

“The decline can be attributed to the maturation of bonds offsetting new issues during the quarter,” AfDB said.

Year over year, however, corporate bonds were up 0.01% from the $ 31 billion recorded in the first quarter of 2020.

Among industries, the banking sector held the largest share of outstanding corporate bonds with 41.8% of the total, followed by the real estate sector with 23.8%.

However, even though it grew faster than its peers, the Philippine bond market was the second smallest among emerging East Asian countries in the first quarter, only beating the Vietnamese market by $ 71 billion.

In contrast, the largest issuers in March were China ($ 15.799 billion), South Korea ($ 2.382 billion) and Thailand ($ 3.443 billion).

The local currency bond market in emerging East Asian countries continued to grow in the first quarter to reach $ 20.3 trillion in March. This figure was 2.2% higher quarter-on-quarter and 15.9% higher year-on-year.

“[The] overall bond market growth moderated somewhat in the first quarter of 2021 as governments seek to balance fiscal policy and businesses weigh in uncertainty over economic recovery, ”AfDB said.

“Investor sentiment has remained subdued amid looming uncertainties caused by the COVID-19 pandemic and inflation fears in the United States. This led

volatility in financial markets, especially in March… The COVID-19 pandemic remains the biggest downside risk… Another potential risk is the possibility of tightening liquidity conditions globally, especially as the Federal Reserve could tighten US monetary policy in response to growing inflationary pressure, ”he added. – LWTN



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