March 22, 2019
The Philippine bond market recorded the fastest growth among emerging East Asia’s local currency bond markets in the fourth quarter of 2018, the Asian Development Bank (ADB) said on Thursday.
In a quarterly report on the emerging East Asia bond market, the ADB said the country’s bond market grew by 5.3 percent to P6.09 billion ($116 million) in the fourth quarter of last year from P5.79 billion ($107 million) during the third quarter.
The fourth quarter result was also higher by 11.4 percent compared to the P5.47 billion ($110 million) recorded in the fourth quarter of 2017.
The amount of outstanding government bonds also went up by 7.4 percent to P4.78 billion ($91 million) from P4.45 billion ($89 million) supported by the growth in Treasury bills and bonds.
“The strong demand was fueled by improved investor sentiment on hopes the US Federal Reserve would engage in fewer interest rate hikes in 2019 and that the Philippine central bank may rein in monetary tightening,” the ADB said in a statement.
The ADB said corporate bonds went up by 28.9 percent to P1.31 billion ($25 million) from P1.02 billion ($20 million) a year ago.
“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 said.
For foreign holdings of local currency bonds, the ADB said the Philippines saw the largest increase of 7 percent “as lower inflation expectations and a likely pause in monetary tightening helped boost demand for government bonds.”
The ADB said that while investor sentiment toward emerging East Ais’s local currency bond markets improved, concerns like financial stability and the effects of the ongoing trade conflicts between China and the United States continue to persist.
“Risks to financial stability in emerging East Asia have receded somewhat recently,” ADB Chief Economist Yasuyuki Sawada said.
“However, some uncertainties persist, notably from the unresolved trade conflict between the PRC and the US, a potentially disorderly exit of the UK from the European
Union, and slowdown of global growth momentum. The rapid buildup in private debt during the past decade could also damage economies and financial stability in the region,” Sawada added.
The ADB said as of end-2018, there were $13.1 trillion in local currency bonds outstanding in emerging East Asia, up by 11.9 percent from 2017.
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