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ADB cites expansion of PH bond market in Q1

By CHINO S. LEYCO

The Philippines’ bond market expanded in the first three-months owing to unprecedented government borrowings for coronavirus response as well as investors’ rosy economic prospects before the quarantine period, the Asian Development
Bank (ADB) monitoring showed.

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The local currency bond market reached P7.106 trillion in January to March this year, up by 7.9 percent compared with P6.588 trillion in the same period last year, the ADB Asia Bond Monitor revealed yesterday.

At end-March, the domestic bond market comprised 77.8 percent government securities and 22.2 percent corporate IOUs.
During the quarter, government bonds grew by 6.2 percent to P5.526 trillion from P5.203 trillion in year ago, while corporate notes amounted to P1.579 trillion, an increase of 14 percent compared with P1.385 trillion in the same period in 2019.

ADB said the government raised a substantial volume of debt last quarter to take advantage of the strong liquidity following cuts in the reserve requirement ratio by the Bangkok Sentral ng Pilipinas (BSP) and lower interest rates.

Issuance of Treasury bonds amounted to P414.6 billion, and Treasury bill reached P303.6 billion in the first three-months.
“The government can take advantage of strong local demand for securities, especially for short-term tenors as liquidity onshore remains high,” the ADB said.

“The BTr [Bureau of the Treasury] may also adjust its borrowing program upward given the fiscal measures being taken to contain the impact of COVID-19 on the economy,” the bank added.

The Duterte administration also must ensure that it has the resources to prop up the economy and support growth in the near-term, the ADB said.

Meanwhile, the ADB said that outstanding corporate bonds are mainly from the banking sector, which comprised 41.2 percent, followed by property companies and holding firms cotrolling 22.9 percent and 14.8 percent of the market, respectively.

“Bond issuances from the corporate segment in Q1 2020 sustained the momentum of the previous quarter with double-digit growth of 38.4 percent quarter-on-quarter,” ADB said.

“The issuance growth came on the back of strong economic prospects prior to the outbreak of COVID-19 as corporates sought to capitalize on investor optimism by tapping the bond market,” the bank said.

Likewise, the reserve requirement ratio cuts in the final three-months of the 2019, with expectations of further reductions, also unleashed liquidity that boosted corporate demand, the ADB said.


Source: Manila Bulletin (https://business.mb.com.ph/2020/06/25/adb-cites-expansion-of-ph-bond-market-in-q1/)

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