Market Summary

Yield Movements

Between 2 June and 29 August, local currency (LCY) government bond yield curve in the Philippines shifted downward across all maturities driven by the Bangko Sentral ng Pilipinas' (BSP) dovish monetary policy stance amid easing inflation and slowing economy. The BSP conducted two consecutive 25 basis points rate reductions in June and August, bringing the overnight reverse repurchase rate down to 5.00%. Furthermore, on 11 August, the BSP signaled two more rate cuts in 2025 to foster economic growth.

Local Currency Bond Market Size and Issuance

At the end of June, growth in the LCY bond market slowed to 2.7% quarter-on-quarter (q-o-q) to PHP13.8 trillion, driven by contractions in the stock of central bank securities (-18.9% q-o-q) and corporate bonds (-4.0% q-o-q) amid reduced issuances during the quarter. In contrast, the stock of Treasury and other government bonds grew 5.2% q-o-q on increased issuance from the government amid a favorable interest rate environment. Total LCY bond issuance also slowed in the second quarter of 2025, tallying PHP2.7 trillion on marginal growth of 0.5% q-o-q amid trade policy uncertainty.

Sustainable Bond Market

The Philippines' sustainable bond market expanded 5.3% q-o-q to USD14.3 billion at the end of June. Despite this growth, it remained among the smallest across emerging East Asia's sustainable bond markets, comprising only 2.0% of the region's total. Sustainability instruments continued to dominate the domestic economy's sustainable debt stock, accounting for 87.2% of the total sustainable bonds outstanding at the end of June, followed by green bonds and sustainability-linked bonds with market shares of 11.1% and 1.7%, respectively.