Bloomberg News

Philippine Bonds Rise Before Budget Data; Peso Gains on Inflows

December 20, 2011

Dec. 20 (Bloomberg) -- Philippine 10-year bonds rose following an upgrade to the country’s credit-rating outlook and before the government reports its budget balance for November this week. The peso advanced.

Standard & Poor’s raised its outlook for the Philippines last week, citing “strong external liquidity and signs of improving growth prospects.” The company’s long-term foreign- currency rating of BB is two levels below investment grade. The 10-month budget deficit was 74.3 billion pesos ($1.7 billion), compared with 270.3 billion pesos a year earlier, the government reported on Nov. 30.

“There’s no reason for interest rates to eventually go up given the positive macroeconomic fundamentals surrounding the government finances,” said Jonathan Ravelas, chief market strategist at Banco de Oro Unibank Inc., the Philippines’ largest lender.

The yield on the government’s 5.75 percent bonds due November 2021 fell nine basis points, or 0.09 percentage point, to 5.548 percent in Manila, according to noon fixing prices from Philippine Dealing & Exchange Corp. That’s the lowest level for a benchmark 10-year note since at least 1998, according to data compiled by Bloomberg.

The fiscal deficit probably widened in November as the government paid bonuses and increased spending on public works, Budget Secretary Butch Abad told reporters on Dec. 16.

Money Sent Home

The peso appreciated on speculation remittances from Filipinos working overseas picked up before Christmas. The currency climbed 0.3 percent to 43.872 per dollar at the close in Manila, according to Tullett Prebon Plc. The currency touched 44.323 on Dec. 15, the weakest level since Jan. 31.

“There were last-minute flows from remittances,” Banco de Oro Unibank’s Ravelas said.

Money sent home by Philippine citizens abroad may have risen in November and may sustain that trend in December, central bank Deputy Governor Diwa Guinigundo said in Manila yesterday.

Remittances, which account for 10 percent of the Philippines’ $200 billion economy, increased at a slower pace in October, rising 6.2 percent from a year earlier, compared with an increase of 8.4 percent the previous month, the central bank said on Dec. 15.

--Editors: Simon Harvey

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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