SUSTAINABLE bonds issued in the Association of Southeast Asian Nations (Asean), the People’s Republic of China (PRC), Japan and the Republic of Korea grew faster than global and euro-area sustainable bond markets in 2023.
Based on the Asia Bond Monitor, sustainable bonds expanded 29.3 percent last year, outpacing the 21-percent growth of the global and euro-area sustainable bond markets.
ADB noted that outstanding sustainable bonds in the Asean plus 3 reached $798.7 billion by the end of 2023 and accounted for around 20 percent of global sustainable bonds.
“Asean sustainable bond issuance made up a higher share of local currency financing and long-term financing in 2023, driven by public sector participation,” ADB Chief Economist Albert Park said.
“The public sector’s participation not only adds to the supply of sustainable bonds, but also serves as a model case for the private sector and helps set a long-term pricing benchmark for these bonds in domestic markets,” he added.
ADB said sustainable bonds are bond instruments used to finance projects and programs with environmental and social benefits.
The global and euro-area sustainable bond markets reached $4 trillion and $1.5 trillion, respectively, by the end of 2023.
ADB said Asean markets recorded $19.1 billion of sustainable bond issuance last year, accounting for 7.9 percent of aggregated issuance in Asean+3 sustainable bond markets. This compares with Asean’s 2.5-percent share of Asean+3’s general bond issuance.
Meanwhile, ADB said Asean recorded a higher share of local currency financing and long-term financing in sustainable bond issuance, with 80.6 percent of sustainable bond issuance denominated in local currency and a size-weighted average tenor of 14.7 years.
This outperformed the corresponding numbers of 74.3 percent and 6.2 years in Asean+3, and compares with 88.9 percent and 8.8 years in the euro area.
In the Philippines, local currency (LCY) government bond yields rose for nearly all tenors between December 1, 2023 and February 29, 2024 as the Bangko Sentral ng Pilipinas maintained its policy rate near a 17-year high.
ADB added that the increase in yields was also influenced by the government’s retail bond offering during 13–23 February amid upward market adjustments based on the Retail Treasury Bond rate.
The report also highlighted recent developments in the Philippine bond market such as the First Tokenized Bonds as well as the First Dollar Islamic Bonds.
In November 2023, the Bureau of the Treasury (BTr) raised P15 billion from the sale of its first Tokenized Treasury Bonds (TTBs) with a coupon rate of 6.5 percent and a tenor of 1 year.
The TTBs were offered to qualified institutional investors in minimum denominations of P10 million and increments of P1 million thereafter. (See: https://businessmirror.com.ph/2023/11/21/btr-doubles-take-from-tokenized-bonds-issue/).
“The BTr’s issuance of TTBs aim to promote greater financial inclusion and modernization of financial platforms through digital technology. The Government of the Philippines is planning to expand this project to retail investors in the future,” ADB said.
ADB also noted the government’s efforts to tap the global Islamic financial market for the first time through its maiden issuance of 5.5-year USD-denominated sukuk bonds with a profit rate of 5.045 percent.
The government successfully raised $1 billion from its offering in late November and settled the transaction on 6 December. (See: https://businessmirror.com.ph/2023/12/01/ng-bags-1b-from-sukuk-issuance/)
The sukuk bonds aims to develop Islamic banking and finance in the Philippines, allowing the country to attract investors across the Middle East.
“This issuance seeks to establish an active and liquid reference curve for the sukuk market for future issuers. The net proceeds of the bond completed the government’s external commercial funding requirements for 2023 and will be used for general purposes, including but not limited to the government’s budgetary support,” ADB said.
Meanwhile, ADB said financial conditions in emerging East Asia improved marginally between 1 December and 29 February, as the United States Federal Reserve was expected to ease its monetary stance, while inflation continued to moderate and most economies posted sound economic growth in the region.
Equity markets gained in 6 of 9 regional economies, and a total of $17.4 billion in net foreign equity inflows was recorded. Emerging East Asia includes the member economies of Asean; the PRC; Hong Kong, China; and the Republic of Korea.
Emerging East Asia’s local currency bond market grew 2.5 percent in the final quarter of last year to $25.2 trillion. Overall bond issuance contracted 4.8 percent from the previous quarter, as most governments had fulfilled their funding requirements in prior quarters, while the PRC led a contraction in corporate borrowing amid a weak economic outlook.