Growth in the country's bond market slowed in the second quarter of the year owing to reduced issuance from both corporate and government sectors, amid potential interest rate cut by the Bangko Sentral ng Pilipinas (BSP).
Based on the Asian Development Bank’s (ADB) Asia Bond Monitor (ABM) report, total local currency (LCY) bonds outstanding hit P12.5 trillion from April to June, with quarterly growth slowing to 1.9 percent from 2.2 percent in the previous quarter.
Treasury and government bonds rose by 2.8 percent quarter-on-quarter, driven by fewer bond maturities.
Corporate debt dropped by 7.7 percent in the year’s second quarter, continuing the 8.2 percent decline from the previous quarter.
“Bond issuances contracted in Q2 2024 amid high interest rates,” the ADB report said. The total LCY bond issuance fell by 15.7 percent during the quarter to P2.6 trillion, reversing the 37.3 percent growth seen in the previous quarter.
Government bond issuance dropped 51.7 percent in the second quarter of 2024, following a surge in the previous quarter due to February's Retail Treasury bond sale.
Similarly, corporate bond issuance declined by 41.2 percent quarter-on-quarter as firms held off on new bonds due to high interest rates.
The ABM report said that companies “postponed bond issuances in anticipation of an interest rate cut from the BSP in August.”
Meanwhile, SM Prime Holdings and Energy Development Corp. were the top issuers in second quarter, representing 58 percent and 23.2 percent of total corporate bond issuance, respectively.
As of end-June, the investor profile in the local currency government bond market remained unchanged, with banks and investment houses holding about 50 percent of the total debt.
This was followed by contractual and tax-exempt institutions' holdings, which fell to 30.9 percent from 31.8 percent from the previous year.
In the second quarter, the foreign-currency sustainability bonds made up 77 percent of the Philippine sustainable bond market, which totaled USD 9 billion, evenly split between government and corporate segments.
The size-weighted average tenor in the Philippines' sustainable bond market was 12.7 years, with government bonds typically having longer tenors and the private sector favoring shorter durations. (Derco Rosal)