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Local currency bond market grew 11.4% year-on-year in Q4 2018

/ 05:26 AM March 22, 2019

The easing of inflation toward the end of last year attracted more investors such that the Philippines’ local currency bond market grew 5.3 percent quarter-on-quarter in the fourth quarter of 2018, the Asian Development Bank (ADB) said.

The Manila-based ADB’s Asia Bond Monitor March 2019 report which was released on Thursday showed that the year-on-year growth in the local currency bond market was faster at 11.4 percent during the quarter that ended in December 2018.

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As such, total outstanding bonds increased to P6.1 billion as of the end of December from P5.8 billion a quarter ago.

The outstanding amount of government-issued bonds rose 4.1 percent quarter-on-quarter, “spurred by growth in Treasury bills and bonds,” the ADB said.

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“The foreign holdings share in local currency government bonds climbed during the fourth quarter of 2018 in all markets except China and Malaysia. The largest gains in the share of foreign holdings were observed in the Philippines, due to falling inflation expectations, and in Thailand,” the multilateral lender’s report read.

Headline inflation hit over nine-year highs in the third quarter of last year amid food supply bottlenecks and skyrocketing global oil prices, such that the government eased the rules on food importation to temper the rate of increases in the prices of basic commodities before the year ended.

As for corporate bonds, outstanding peso-denominated IOUs climbed 9.7 quarter-on-quarter, thanks to big banks, the ADB added.

“Issuances of local currency corporate bonds in the fourth quarter of 2018 totaled P130.9 billion, increasing by more than 150 percent from the previous quarter, the ADB said, adding that “Metrobank and BPI provided the largest issuances” during the period.

“Banks increased their issuance of bonds as an alternative funding source after the Bangko Sentral ng Pilipinas relaxed its rules to allow banks to tap the domestic capital market without prior approval from the central bank,” the ADB noted. —BEN O. DE VERA

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TAGS: Asian Development Bank (ADB), Inflation, local currency
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