Bond transactions up 74% to P316.77B in 1st semester

The country’s bond market grew significantly in the first half as investors filled with cash allowed firms to raise more funds to support their expansion and other expenditure requirements.

Bond market data provided by First Metro Investments Corp. showed that private companies and government entities raised P316.77 billion from sale of bonds to the domestic market in the first six months of 2011.

The amount represented a 74-percent increase from only P181.6 billion registered in the same period a year ago.

Of the amount raised in the first half of this year, P178.97 billion, or 56 percent, was generated by government entities that had engaged in bond sales, such as the Bureau of the Treasury and the Power Sector Assets and Liabilities Management Corp. (PSALM).

FMIC said the healthy pace of growth of the country’s bond market would continue throughout the year as the rising income of investors would enable them to purchase more bonds.

Roberto Juanchito Dispo, president of FMIC, said demand for funds by the corporate sector would likely increase in the second half of the year.

Most firms are expected to grab investment opportunities, including public infrastructure projects being offered to the private sector, Dispo added.

“Against this positive backdrop, we see more capital market deals being consummated,” Dispo said.

According to the FMIC executive, government entities are expected to take advantage of the market’s growing liquidity by issuing more bonds.

Some government instruments that are expected to be issued in the second half are Retail Treasury bonds, PSALM notes and NFA [National Food Authority] bonds.

Dispo also said the government would like to issue in July as much as P100 billion in fresh long-term bonds and offer these instruments for swap with existing bonds that are about to mature.

The bond swap is intended to lengthen the average maturity of the government’s debts.

Monetary officials earlier said that growth of the country’s bond market was a welcome development because it indicated diversity of fund sources.

The Bangko Sentral ng Pilipinas said resources of the banking industry would also grow. As a result, banks may increase their capability to lend to corporate borrowers.

The BSP said that it was good to have alternative sources of funds, such as the bond market, for this these would ensure support for vital investment initiatives.