Market Summary

Yield Movements

Between 1 June and 31 August, local currency (LCY) government bond yields in the Philippines increased for all tenors except for the 1-month and 3-month maturities. The increase in yields was influenced by the Bangko Sentral ng Pilipinas’ hawkish tone amid persistent elevated inflation despite a continued decline since February as well as the dampened investor sentiment due to the economy’s slower-than expected growth in the second quarter (Q2) of 2023.

Local Currency Bond Market Size and Issuance

LCY bond market in the Philippines grew 1.3% quarter-on-quarter (q-o-q) in Q2 2023 on expansions in both the corporate and government bond markets. Treasury and other government bonds grew 2.3% q-o-q as issuances exceeded maturities, while the corporate bond market rebounded 1.2% q-o-q due to the large volume of issuance during the quarter. Total issuance of LCY bonds in the Philippines contracted 19.2% q-o-q in Q2 2023 on reduced issuance from the government due to relatively high base in the preceding quarter brought about by the Government of the Philippines’ issuance of Retail Treasury Bonds in February. 

Policy and Regulatory Developments

On 30 June, the Bangko Sentral ng Pilipinas (BSP) began its 56-day BSP Bill offering as an additional tenor under the BSP Securities Facility alongside the 28-day BSP bill. On the same day, the BSP also reduced the reserve requirement ratio by 250 basis points for banks and non-bank financial institutions to 9.5%. These initiatives aim to improve the BSP’s adaptability to shifting liquidity conditions and to ensure stability in domestic liquidity and credit environment.