Philippine bond market grows 12.1% in Q2

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The Philippines’ local currency (LCY) bond market grew at a “robust” year-on-year rate (y-o-y) of 12.1 percent as of the second quarter of the year, according to the latest quarterly Asia Bond Monitor from the Asian Development Bank (ADB).

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Total LCY bonds amounted to P4.1 trillion, or about $95 billion at end-June, increasing 1.9 percent from P4 trillion at end-March, led by both treasury bills and bonds.

The report said that government securities accounted for the majority of bonds outstanding, totaling P3.5 trillion, while corporate bonds reached P540.8 billion.

It added that outstanding fixed-income instruments issued by the Philippine government and government-controlled companies went up by 12.5 percent y-o-y and 2 percent quarter-on-quarter (q-o-q) to close at P3.5 trillion at end-May.

Treasury bills, on the other hand, advanced at the “fastest pace” at 15.7 percent y-o-y and 1.9 percent q-o-q. It stood at P295.1 billion at end-May. Treasury bonds rose 13.2 percent y-o-y and 2.1 percent q-o-q to P3.1 trillion.

The ADB report also said that fixed-income instruments issued by government-controlled companies registered a decline of 8.5 percent y-o-y to P113.5 billion at the end of the second quarter of the year.

Limited number of firms

Meanwhile, Asia Bond Monitor pointed out that only 51 companies are actively tapping the capital market in the Philippines.

It said that the top 31 issuers accounted for 92.2 percent of the total amount of LCY corporate bonds outstanding, or P540.8 billion at end-June.

“Out of the top 31 bond issuers, only five companies are privately held corporations and the rest are publicly listed with the Philippine Stock Exchange [PSE],” it explained.

Furthermore, the ADB report revealed that San Miguel Brewery (SMB) remained the largest corporate issuer in the country with P45.2 billion of outstanding debt.

Ayala Corp. followed SMB as the next largest borrower with P40 billion, while Banco de Oro Unibank was in the third spot with P38 billion of outstanding bonds.

“Banks and financial service companies, including investment houses, remained the leading issuers of debt in second quarter of 2013 with 28.3 percent of the total as BSP [Bangko Sentral ng Pilipinas] moved toward more stringent liquidity and capital requirements,” the report said.

It also pointed out that the market share of most industries remained unchanged, except for electricity generation and distribution, which rose to 8.5 percent in the second quarter of the year from 6 percent in the first quarter, and real estate, which fell to 15.7 percent from 16.7 percent.

Firms from industries as diverse as electricity generation and distribution; telecommunications; and thoroughfares and tollways continued to have shares of total corporate bonds outstanding in the single-digit levels, it said.

On the other hand, Asia Bond Monitor reported that the Philippine local currency government bond yields rose for most tenors between end-March and end-May.

“The rise in yields was most evident for tenors of 1 year and below, with yields rising between 127 basis points and 175 bps. Yields for 10- and 25-year bonds increased 29 bps and 51 bps, respectively,” it said.

The report attributed the increase to a sell-off at the end of May, driven by speculation that the United States Federal Reserve would soon start tapering its quantitative easing program.

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