BSP, govt offerings boost bond market

Bangko Sentral ng Pilipinas

THE local currency bond market expanded in the third quarter as issuances by the government and the Bangko Sentral ng Pilipinas (BSP) grew, the Asian Development Bank (ADB) noted in a November report on regional developments.

Outstanding central bank securities, in particular, were said to have grown by 44.8 percent quarter-on-quarter as the BSP moved to mop up the excess liquidity brought about by the lowering of reserve requirements and the expiration of pandemic-related relief measures.

Outstanding Treasury and other government bonds, meanwhile, grew by a slower 0.3 percent quarter-on-quarter with the government said to have “failed to meet its borrowing plan for the quarter due to investors’ demand for high yields.”

The stock of corporate bonds, on the other hand, contracted by 2.4 percent due to reduced issuances. The bulk of the outstanding bonds were issued by property firms at 31.9 percent of the total, the ADB said.

Total issuances grew by 9.6 percent quarter on quarter, with BSP issuances up 14.3 percent following the launch of a 56-day bill and Treasury and other government bond offerings up by 2.45 percent.

Elevated borrowing costs, meanwhile, led to corporate bond issuances plunging by 38.8 percent, with only three firms tapping the bond market.

Banks and investment houses continue to be the largest investor group, accounting for 46.6 percent of the local currency bond market as of the third quarter.

Banks and investment firms were said to have added P400.7 billion worth of government bonds to their holdings, while contractual savings and tax-exempt institutions saw their share dip to 32.2 percent from 32.9 percent a year earlier.

All other investor groups’ holdings remained below 10 percent, and state-owned firms and local governments continued to hold a share of less than 1.0 percent, the ADB said.

Yields rose for all maturities amid persistent elevated inflation between September 1 and November 10, driven by the BSP’s hawkish policy stance.

The central bank, the ADB said, will likely maintain its tightening policy until inflation falls within target.