Philippines Bond Market Sees Slower Growth, Sharp Drop in Issuance in Q2

The Philippines' local currency bond market saw a slower growth rate in the second quarter compared to the previous period, but bond issuance fell during the same period, according to the Asian Development Bank (ADB). In a report, the ADB said the country’s outstanding local currency debt securities rose by 3.3 percent to P14.5 trillion in the second quarter from the previous quarter. This is slightly faster than the 2.8 percent increase in the first quarter. Excluding debt securities with tenors of one year or shorter, the local currency bond market rose by 2.7 percent quarter-on-quarter to P13.2 trillion from April to June, slower than the previous quarter’s 3.5 percent expansion. Both government and corporate bonds registered slower expansions in the second quarter. In particular, outstanding government bonds rose at a slower pace of 2.6 percent in the second quarter compared to the previous quarter’s 3.4 percent, while corporate bonds increased by 3.2 percent compared to 4.4 percent previously. The ADB also said that bond issuance weakened in the second quarter, falling by 45 percent to P476.2 billion after surging by 212 percent in the previous quarter. It said the weaker bond activity was “due to a high base effect from front-loaded government borrowing.” Government bond issuance declined by 46 percent quarter-on-quarter, while corporate issuance fell by 41 percent. The ADB also said that yields on Philippine local currency government debt securities fell by 21 basis points on average from June to August. The declines were concentrated in tenors of one year or longer. “Despite cumulative rate hikes of 50 basis points in June and August, moderating inflation and weakening growth exerted downward pressure on yields,” the ADB said. Inflation eased to 6.1 percent in August from 6.2 percent in July. Average inflation from January to August was at 5.2 percent, above the government’s two to four percent target. Meanwhile, the country’s economic growth averaged 2.6 percent in the first half, below the government’s revised goal of 3.5 to 4.5 percent. By investor group, the ADB said that banks and other financial institutions collectively accounted for 61.2 percent of total holdings in June, up from 58.1 percent in May. Domestic investors held 96 percent of the country’s local currency debt securities.