PHL bond market contracts in Q1

The local securities market contracted by 1.1% to P4.706 trillion during the first quarter of 2016 from P4.76 trillion recorded in the October to December period last year.

Year on year, the debt market grew by just 0.5% from P4.681 trillion in the first quarter of 2015.

ADB said in the June 2016 edition of its Asia Bond Monitor report that the quarter-on-quarter contraction of bond sales in the Philippines "largely stemmed from decreases in the existing stock of local currency yield (LCY) government bonds, particularly Treasury bonds and bonds issued by government-owned or -controlled corporations."

The year-on-year uptick, meanwhile, was driven by relatively buoyant annual growth in corporate bonds, ADB said, adding that at the end of March, the stocks of LCY government bonds and LCY corporate bonds constituted 83% and 17%, respectively, of total LCY bonds outstanding.

Government issuances totaled P3.893 trillion during the quarter, down 1.3% from the previous quarter and 0.6% lower year-on-year from P3.946 trillion and P3.917 trillion, respectively, the report showed.

These consisted of P279 billion in Treasury bills, P3.539 trillion in Treasury bonds and P76 billion from securities issued by government-owned and -controlled corporations.

Corporate bonds, meanwhile, dipped by 0.1% to P813 billion at end-March from P814 billion in the previous quarter. Year on year, issuances by local companies grew by 6.3% from P765 billion.

The Manila-based lender said 30 companies are actively tapping the bond market in the Philippines, accounting for 89% of total corporate bonds outstanding or P719.9 billion during the first quarter.

"Three Philippine companies tapped the corporate bond market for funding purposes in the first quarter: Ayala Land, Inc. which issued P8 billion in 10-year bonds at a 4.85% coupon in March; Phoenix Petroleum, which raised P3.5 billion from a triple-tranche commercial paper sale in January; and SL Agritech, which raised P1 billion from a triple-tranche commercial paper sale in January."

At end-March, the multilateral lender said Ayala Land remained the top corporate issuer with P66.2 billion in outstanding bonds, followed by Metropolitan Bank and Trust Co, (P46.8 billion); SM Prime (P45 billion); Ayala Corp. (P40 billion); and San Miguel Brewery, Inc. (P37.8 billion).

In the report, ADB noted that bond yields in most emerging East Asian markets fell amid a weak global economy except the Philippines and the People's Republic of China, where yields generally picked up.

"The United States Federal Reserve continued to exercise caution in keeping interest rates steady at its Federal Open Market Committee meeting on 26-27 April. Global growth forecasts for 2016 have been revised downward amid sluggishness in the world economy," ADB said.

In March, ADB said it expects developing Asia's growth to decelerate to 5.7% in 2016 and 2017 from 5.9% in 2015.

In April, the International Monetary Fund also cut its 2016 global growth forecast to 3.2%, down from 3.4% in January.

By country, the People's Republic of China continued to lead the expansion of the bond market in emerging East Asia with $6.505 trillion, the largest in the region, followed by the Republic of Korea ($1.788 trillion).

The six Southeast Asian markets' -- Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam -- recorded total bond issuances of $179 billion in the first quarter, which was up from $166 billion in the fourth quarter of 2015 and $170 billion compared to the year-ago totals.

"The quarter on quarter growth stemmed from increases in Indonesia, the Philippines, and Thailand, while the year on year uptick was induced by positive growth in all Southeast Asian markets except Singapore's," it added.

Source: Bworld online