Corporate bonds fuel debt market expansion

Corporate bonds drove the growth of local debt markets in the third quarter, even as their tradability remained limited, indicating demand from investors who put their money in whatever instruments were available.

A new report of the Asian Development Bank showed that outstanding government bonds grew by just a hair, reflecting the state’s confidence that rising revenues would cover disbursements.

Philippine companies, however, outpaced their counterparts in the region, as the growth of their debts was faster than anywhere else in Southeast Asia.

At the end of September, local currency bonds in the Philippines grew by 6.7 percent year-on-year to P4.6 trillion. Government securities accounted for the majority of bonds outstanding, totaling P3.85 trillion, while corporate bonds hit P749 billion, data from the ADB showed.

“Growth in the Philippine local currency bond market was buoyed by the large increase in the stock of corporate bonds,” the Manila-based multilateral lender said in a report.

Corporate bonds grew by 37.6 percent over last year to reach P749 billion. Total corporate bond issuance in the third quarter stood at P66.2 billion. SM Prime Holdings was the largest issuer in the third quarter, selling P20 billion worth of bonds, GT Capital was second with P12 billion, followed by Aboitiz Power and Security Bank with P10 billion each.

“The Philippines posted the largest growth in corporate bonds on both a quarter-on-quarter and year-on-year basis, partially due to a low base,” the ADB said.

There were 53 companies that had outstanding stock of bonds as of end-September. The top 31 issuers accounted for 87.9 percent of the total as of end September.

The government bond sector also recorded positive growth, although at a much slower pace, the ADB said. Aside from the government’s regular auction of treasury bonds, the Bureau of the Treasury conducted a bond exchange in August as part of its debt liability management program.