Bond market in philippines


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Bond market in philippines

  1. 1. Nikita Pandey
  2. 2.  The Philippine domestic bond market consists of short- and long- term bonds, mainly issued by the national government.  The Philippine bond market is dominated mainly by Treasury notes and bonds. Although the size of the Philippine corporate bond market is still small relative to government bonds, it has been growing rapidly over the years.  In the Philippines, corporate bond issuance came from various sectors, mostly banks, real estate and telecommunication companies, toll way operators and a beer-based conglomerate.  The growth in the region’s bond market was driven partly by huge demand from foreign investors looking for more attractive returns than those available in the United States, Europe and other developed markets.
  3. 3.  Types of Securities Issued by the National Government through the Bureau of theTreasury (BTr) •Treasury bills (fixed-rate) •Treasury bonds (fixed-rate coupon-bearing and zeroes) • Retail treasury bonds (RTBs, fixed-rate coupon- bearing)Multi-currency retail treasury bonds (MRTBs, fixed-rate coupon-bearing) • Dollar-linked peso notes (fixed-rate) Issued by the National Government through Other Entities • Debt securities issued by government-owned and - controlled corporations (GOCCs) • Debt securities issued by government agencies
  4. 4.  TheAsian Development Bank’s (ADB) latest Asian Bond Monitor report showed that the country’s local currency bond market expanded by 13.77 percent year on year to nearly $100 billion in the first quarter of 2013.  Government bonds made up the bulk of the debt issued in the Philippines during the three-month period.This amounted to $86 billion, up 12.77 percent year-on-year.  The corporate bond market expanded by 19.8 percent, making it one of the fastest-growing markets in the region.
  5. 5.  The ADB said this was fueled by corporate bond issuances of BDO Unibank Inc., Eagle Cement Corp. and conglomerate GT Capital Holdings Inc.  The local corporate bond market’s growth was slightly faster than the 19.5 percent year-on-year average growth in the region, amounting to $2.4 trillion at the end of March.  In the meantime, the government bond market grew at a more modest annual pace of 8.3 percent.
  6. 6.  Bonds with maturities of more than 10 years re-emerged in the market last year after a long hiatus, although they comprise only a two percent share of the total corporate bond market. Before 2006, corporate bond issuers rarely offered bonds with maturities beyond five years and never more than 10 years.
  7. 7.  The top borrowers were San Miguel Brewery, which raised P45.2 billion; Ayala Corp, P40 billion; BDO Unibank, P38 billion; SM Investments Corp, P36.1 billion; Ayala Land Inc, P31. 2 billion; Philippine National Bank, P21.9 billion; Manila Electric Co, P19.4 billion; Philippine Long DistanceTelephone Co, P17.3 billion; and Maynilad Water Services Inc, P16.6 billion.  Other issuers in the first quarter were SM Development Corp, P16.3 billion; Filinvest Land Inc, P14.5 billion; Rizal Commercial Banking Corp, P14 billion; Petron Corp, P13.6 billion; JG Summit Holdings Inc, P13.3 billion; and Security Bank, P13 billion.
  8. 8. Transparency  The following has contributed to a lack of transparency in the Philippine corporate bond market: 1. Exemptions from rating and listing requirements. 2.Absence of competitive pricing information using benchmark government debt prices. 3. No readily accessible monitoring and surveillance methods/tools for use by regulators. 4.Absence of data consolidation on completed transactions. 5. No access to reliable information on creditworthiness of issuers, except for sophisticated institutional investors. Problems besetting institutional investors  Some institutional investors, such as pre-need companies, non-life insurance and mutual funds, (which, because of their liability structures, represent the bulk of demand for corporate issues) currently have a poor reputation in the market, which is hampering their growth. Dealing with the problems of institutional investors may require a stronger regulatory environment.
  9. 9. No organised trading  The corporate bond market in the Philippines is bilateral and conducted OTC. Currently, there is no true picture of secondary market liquidity, and it is not clear whether there are repo or derivatives markets.The lack of pricing and distribution information has dampened the demand for corporate bonds. High issuance costs  Because of high issuance costs, only top-tier corporations can issue bonds. Indeed, most Philippine companies, including small and medium-sized enterprises, would rather obtain their funds via bank loans than via the capital market.
  10. 10. Outmoded bankruptcy laws  There are significant gaps between existing bankruptcy laws and investor protection.The current corporate rehabilitation law is obsolete, and does not ensure the ability of investors to immediately recover investments in the event of default. 142 BIS Papers No 26 Need for increased regulatory supervision  There is a need for increased supervision of corporate bond issuance. Publication of post-trade information and other market data is required not only to promote trading in the secondary market, but also to ensure proper market monitoring and surveillance.
  11. 11.  Philippines has long been amongAsia's most aggressive sovereign borrowers. Now it is about to become one of its most attractive to foreign investors too.  The economy looks healthy, growing at an annual rate of 6.1 percent in January to June, higher than Malaysia,Vietnam, South Korea,Thailand and Singapore.  The Government sector and the Corporate sector bonds are on a rise.
  12. 12. ThankYou