Market Summary

Yield Movements

The Philippines’ local currency (LCY) government bond yields increased across all tenors between 28 February and 15 May. On average, yields surged 61 basis points (bps) for all maturities. The yields on 3-year to 10-year bonds had the largest increases, ranging from 74 bps to 88 bps, while smaller yield increases were seen at the shorter-end of the curve (1-month to 1-year maturities), averaging 32 bps. Yield increases on bonds with 2-year, 20-year, and 25-year maturities averaged 63 bps. The upward yield movements reflect the defensive stance of investors toward government securities prompted by surging inflationary risks, the impending monetary tightening of the Bangko Sentral ng Pilipinas during the review period, policy uncertainty induced by the recently concluded national elections, aggressive monetary policy normalization by the United States Federal Reserve, and the heightened global uncertainty caused by the Russian invasion of Ukraine.

Size and Composition

The Philippines’ LCY bonds outstanding amounted to PHP10,426.7 billion (USD201.5 billion) in the first quarter (Q1) of 2022 on an expansion of 6.5% quarter-on-quarter (q-o-q). The quarterly growth was driven by the government and corporate segments as both posted strong expansion during the quarter. Government bonds outstanding increased 6.5% q-o-q to PHP8,911.5 billion in Q1 2022 due to higher sales of Treasury bonds and the rebound in BSP bill issuance. Outstanding corporate debt rebounded to a growth of 6.6% q-o-q in Q1 2022 to PHP1,515.2 billion underpinned by high debt sales from firms. On an annual basis, the LCY bond market expanded 14.3% year-on-year. The total LCY outstanding bonds comprised 85.5% government bonds and 14.5% corporate bonds at the end of March.

Policy, Institutional and Regulatory Developments

In April, the Bureau of the Treasury issued the Philippines’ first sustainability samurai bond in Japan. The issuance was part of the government’s sustainability strategy to capture new accounts and mobilize capital from environmental, social, and governance-conscious investors, with the objective to transition to a more sustainable and climate-resilient economy. It also highlighted the government’s commitment to climate change mitigation and adaptation and to deepening its domestic sustainable finance market. The JPY70.1 billion multi-trance debt sale comprised 5-year bonds (JPY52.0 billion), 7-year bonds (JPY5.0 billion), 10-year bonds (JPY7.1 billion), and 20-year bonds (JPY6.0 billion).