Volume of fixed income deals up 21.5% in ’12

MANILA, Philippines—The volume of transactions in the country’s Fixed Income Exchange (FIE) grew by a double-digit pace in 2012 as the favorable sentiment on the Philippines lifted demand for peso-denominated government and corporate bonds.

Total transactions in the FIE, which is the country’s secondary market for bonds issued by government and private entities, amounted to P5.057 trillion last year—up by 21.5 percent from the P4.162 trillion registered the previous year.

In its 2012 report, the Bangko Sentral ng Pilipinas said that the favorable economic performance of the Philippines, as well as the increase in global liquidity, fueled the appetite of local and foreign investors for Philippine securities.

Portfolio investors’ positive sentiment on the Philippines was cemented by the decision of Moody’s Investors Service and Standard & Poor’s last year to upgrade the country’s credit rating to just a notch below investment grade, the BSP said.

“[Monetary easing] implemented by advanced economies contributed to the rise in the volume of transactions at the fixed-income market as foreign investors took advantage of the country’s relatively higher asset yields alongside its improved macroeconomic fundamentals,” the BSP said.

For instance, United States Federal Reserve has embarked on an aggressive bond purchasing program to inject money to the US economy and boost its growth. Stimulus measures implemented in the eurozone and Japan likewise led to an increase in global liquidity.

Economists said part of the extra cash now circulating in the system had been used by investors to purchase emerging-market assets, such as peso-denominated securities.

Portfolio investors are now turning to emerging markets in Asia, such as the Philippines, because of the encouraging growth rates in the region. The lackluster performance of the some of the world’s most advanced economies also resulted in a flight of capital toward emerging markets, the BSP said.

“Trading was also buoyed by investors’ search for higher yields with the US Fed’s announcement to keep interest rates low through 2014, increasing the demand for higher yielding Philippine debt paper,” the BSP said.

The regulator said some of the key drivers of the trade volume in the FIE last year were the bond listings of SM Investment Corp., San Miguel Corp., and Ayala Land Inc. in the amounts of P25 billion, P17 billion and P15 billion, respectively.