Market Summary

Yield Movements

The yields of local currency government bonds in the Philippines fell for all tenors, shifting the yield curve downward between 15 June and 15 August. Yields of bonds with shorter maturities (1-month to 1-year tenors) dropped the most, averaging a decline of 71 basis points. The downward movement reflects a flight to safety amid a weak economic outlook and uncertainty posed by the coronavirus disease (COVID-19) pandemic, as well as abundant liquidity in the market. Benign consumer price inflation is also a factor that kept yields at bay.

Size and Composition

The size of the local currency bond market in the Philippines continued to expand in the second quarter of 2020, reaching PHP7,477 billion (USD150 billion) at the end of June on growth of 5.2% quarter-on-quarter (q-o-q). The increase was driven by the government segment's 6.8% q-o-q expansion but partially dragged down by the corporate segment's 0.4% q-o-q contraction. Government bonds comprised 79.0% of the total bond market at the end of June, with corporate bonds accounting for 21.0%.

Policy, Institutional and Regulatory Developments

In July, the Bureau of the Treasury launched Bonds.PH, the first mobile application in Asia for the distribution of government bonds enabled by distributed ledger technology. The system, which utilizes blockchain technology, allows tamper-proof record keeping and can facilitate complex transactions. Such technology supports financial inclusion in the economy as it makes investing, especially to the unbanked, easier and more secure. The Bureau of the Treasury's issuance of Retail Treasury Bonds in July utilized this technology.