Bond market activity may slow as war drives up rates

CORPORATE BOND issuances and trading could slow this year due to the Middle East war, which could stoke inflation and increase the possibility of monetary tightening here and abroad.

Philippine Stock Exchange, Inc. and Philippine Dealing System Holdings Corp. (PDS Group) President and Chief Executive Officer Ramon S. Monzon said reaching the record P15.9 trillion in secondary market trading volume recorded last year could be difficult amid the ongoing Iran conflict.

“Last year, we had very good trading because interest rates were going down. And now that BSP (Bangko Sentral ng Pilipinas) is talking about increasing rates, it might not be as healthy as last year,” he told BusinessWorld on the sidelines of an event last week.

“We hit about P15.9 trillion last year. So far, we’re still hitting the first three months. We’ve hit more than a trillion a month. So, it depends on where the rates go.”

He noted that no issuance has matched the P115 billion raised by BDO Unibank, Inc. via 1.5-year ASEAN Sustainability Bonds in July last year, which is the largest single corporate bond issue in the Philippines to date,

“Well, the biggest was the BDO [issue] last year. But so far, no indications of that,” Mr. Monzon said.

In 2025, trading volume at the secondary market hit a record P15.91 trillion, surging by 61% from 2024’s P9.89 trillion, as monthly volumes exceeded P1 trillion for 12 straight months, data from the PDS Group showed.

The primary market also saw 25 bond listings from 21 issuers worth P454 billion last year, up by 25% from P362.23 billion in 2024.

As of March 18, new bond listings and enrollments at the primary market reached P220.259 billion so far this year, with total tradeable corporate debt instruments now at P1.4 trillion, issued by 44 companies and made up of 168 securities. 

On Thursday, the BSP kept benchmark rates unchanged during a surprise off-cycle meeting as it sought to calm markets amid growing concerns over the impact of the Middle East war on the economy.

The Monetary Board kept the target reverse repurchase rate unchanged at 4.25% as BSP Governor Eli M. Remolona, Jr. said growth prospects remain weak and the emerging inflationary risks amid the war are largely supply-driven, “for which monetary policy has limited effectiveness.”

The central bank now expects headline inflation to average 5.1% this year — well above its 2-4% tolerance band. Annual inflation last breached the target in 2023.

Mr. Remolona said they would consider tightening their stance if it sees second-round inflation effects or if the global oil supply and price situation worsens.

The BSP last raised rates in October 2023.

The off-cycle meeting came ahead of the Monetary Board’s scheduled policy review on April 23.

Global oil prices have surged above $100 a barrel in the past weeks as the US-Israel and Iran war continues.

Secondary market yields have climbed steadily since the conflict began, with traders pricing in expectations of tighter monetary policy due to the war’s impact on energy trade.

The Asian Development Bank’s March 2026 Asia Bond Monitor report showed that outstanding Philippine local currency bonds shrank by 0.7% to $233 billion (about P13.89 trillion) at end-2025 from $237 billion as of September 2025. This was equivalent to 48.9% of gross domestic product.

This was worse than the 0.1% contraction in the previous quarter.

Year on year, the Philippine bond market expanded by 6%.

INITIAL PUBLIC OFFERINGS
Meanwhile, Mr. Monzon said he is still waiting for the applications for the planned initial public offerings (IPO) of Maya Innovations Holdings, Pte. Ltd. and GCash.

Both fintech firms are expected to launch their IPOs in the third quarter this year, with Maya eyeing a dual listing.

“I think Maya’s not going to do it here. They will do it abroad. They have not filed an application with us,” Mr. Monzon said. “I know GCash is the one that’s really working on it.”

Maya Chairman Manuel V. Pangilinan earlier said that the company is planning to list in the United States first before launching on the PSE by the second half of the year.

The PSE previously said it expects four IPOs this year, including GCash and Maya, as well as PNB Holdings Corp. — Aaron Michael C. Sy