Gov’t dominates local bond market

Government securities boosted the Philippines’ bond market amid the prolonged pandemic as the Bureau of the Treasury raised more debt to finance the fight against COVID-19, the Asian Development Bank (ADB) said on Wednesday.

The Manila-based multilateral lender’s Asia Bond Monitor report for November 2020 showed that government IOUs cornered 79.9 percent of the total local currency bond stock, with $134.1 billion in outstanding treasury bills and bonds as of September.

The ADB noted that the vo­lume of locally issued IOUs rose 10.1 percent quarter-on-quarter.

“Treasury bills and treasury bonds [were] spurring the increase to fund stimulus measures amid the COVID-19 pandemic,” the ADB said.

Bonds issued by corporations also increased by 3.8 percent quarter-on-quarter to $33.7 billion in end-September.

In all, the domestic bond market grew by 8.8 percent quarter-on-quarter and jumped by 21.5 percent year-on-year to $167.8 billion at the end of the third quarter.

Government bonds attrac­ted investors as yields dropped by an average of 7 basis points (bps) between end-August and end-October among short-dated debt paper even as rates of longer securities climbed.

“The decline in government bond yields at the shorter end of the curve was due largely to the accommodative monetary policy stance of the Bangko Sentral ng Pilipinas (BSP) and the inflation rate remaining subdued,” the ADB explained.

So far this year, the BSP cut the policy rate by a cumulative 200 bps to reverse the slow recovery from the pandemic-induced recession while headline inflation remained well within the government’s 2-4 percent target range. —Ben O. de Vera