Bloomberg News

Philippine Bonds Fall on Speculation Revenue Collection to Slow

October 12, 2011

Oct. 12 (Bloomberg) -- Philippine 10-years bonds fell, halting five days of gains, on speculation revenue collection will slow after the government cut its growth forecast for the economy. The peso gained, erasing earlier losses.

Gross domestic product will increase 4.5 percent to 5.5 percent this year, down from a previous estimate of 5 percent to 6 percent, Economic Planning Secretary Cayetano Paderanga said in Manila today. The peso fell as much as 0.5 percent earlier in the day after official data showed yesterday exports dropped in August by the most since September 2009.

“If growth slows, so will tax collections,” said Radhika Rao, an economist at Forecast Pte in Singapore. “That’s why bond yields went up.”

The yield on the 6.5 percent notes due April 2021 increased four basis points to 5.93 percent, according to noon fixing prices at the Philippine Dealing & Exchange Corp.

The peso advanced as central bank Governor Amando Tetangco said today the Asian nation has sufficient liquidity, a stable exchange rate and a “manageable” inflation outlook along with “fiscal space” to help support economic growth. The economy will expand between 5 percent and 6 percent in 2012, Paderanga said.

The peso rose 0.1 percent to 43.405 per dollar in Manila, according to Tullett Prebon Plc. It reached 44.215 on Oct. 4, the lowest level since Feb. 1.

Philippine exports declined 15.1 percent in August from a year earlier after falling 1.7 percent in July, the National Statistics Office said yesterday. President Benign Aquino said today the global slowdown has become a “formidable” problem as he announced 72 billion pesos ($1.6 billion) of extra spending.

--Editors: Simon Harvey, Ven Ram

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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