Browsing by Author "Yanga, Luis Antonio B."

Now showing 1 - 1 of 1
  • ItemRestricted
    Where do we go from here? the state of the Philippine bond market
    (2001-10) TiƱedo, Ted Laurence Y.; Yanga, Luis Antonio B.
    Sources of borrowing can be a primordial concern of the government and other market players like corporations and individual investors. The development of a matured primary and secondary bond market in the country seems to be on a very slow pace. The paper gives an assessment of the state of the Philippine Bond Market based on key factors that propelled bond market developments in more advanced economies. The analysis extends to the juxtaposition of the conditions pre and post Asian financial crisis. The status quo tells us that the market for bonds is shallow with very few participants. Only government treasury bills are evidently the consistent active sector of the market. The increased in volume traded of both short-term and long-term commercial papers before the crisis gave hope for the market's eventual development. Despite of the relative stability in interest rates, a significant decrease in transaction activity in 1998 to 2000 in the bond market makes us infer that there is loss of appetite, in general, for borrowing from the investors' perspective. The need for the establishment of a credit rating agency was responded by the government in the 1980's with the creation of CIBI and later evolved to PhilRatings. However, having no support from existing laws to compel companies to be rated for their creditworthiness, the firm is not profitable and there is no incentive for other firms to enter the credit rating market. Taxation is also a big barrier in the bond market development because it makes it costlier to trade here as compared to other Asian countries like Singapore, in which trading is virtually frictionless. Banks, as traditional sources of debt financing through loans is still the more favorable option for the firms. Its institutionalization despite high loan rates makes them more credible, thus more attractive. The government should recognize its vital role in inducing the development of the bond market as a promoter, facilitator, investor and catalyst. Recent developments through reform bills prioritized by the administration are welcome developments not just for the bond market but the whole financial sector. Institutions like the Securities and Exchange Commission must be given more teeth and have a uniform reportorial way of relaying key data that are timely and credible. Facilities like a plausible exchange must be established to facilitate data gathering in both primary and secondary market providing the right framework for bigger reforms like the tax structure in the financial sector. All these changes spell more confidence especially on the investors and other market makers that would make them indulge in the bond market.