PH bond mart expanded in Q1, notes ADB

MANILA, Philippines–The country’s bond market continued to grow in the first quarter, driven by companies eager to lock in low borrowing rates amid expectations of rising interest rates in the coming months.

Manila-based multilateral lender Asian Development Bank (ADB) said the ability of Asian companies and governments to continue raising funds by tapping debt markets showed that investors were starting to return to the region.

“Most emerging East Asia bond markets have regained their bounce,” ADB Regional Economic Integration head Iwan Azis said.

The ADB’s optimism was accompanied by a caveat; the region’s financial markets may still suffer from capital flight amid the ongoing normalization from overly-accommodative monetary policies in the United States.

According to the ADB’s latest Asian Bond Monitor report, slowing growth in China and Europe, or jitters over political instability in the region as highlighted by the situation in Thailand, could also drive investors away to safer shores.

In the first quarter, the Philippines had the region’s fastest-growing corporate bond market, expanding 15 percent quarter-on-quarter and 27.9 percent year-on-year to $15 billion.

“A lot of companies continued to tap the bond market in anticipation of higher domestic interest rates as the US Federal Reserve continues with its quantitative easing program and amid growing inflation concerns,” the ADB said.

The ADB said diversified companies and banks were the lead issuers of bonds in the first quarter of 2014.

In contrast, the government bond market contracted 3.3 percent quarter-on-quarter to $84 billion as the government issued less securities amid relatively low demand, as market players remained cautious over the quantitative easing program in the United States.