Oct. 16 (Bloomberg) -- The Philippine sale of as much as $1 billion of 25-year, dollar-denominated bonds has drawn orders for more than twice the amount of debt on offer, reflecting investors’ appetite for yield amid near-zero U.S. interest rates.

Orders totaling about $2.5 billion had been placed for the October 2034 notes as of noon in Manila, according to a government official who declined to be named. The country may sell $1 billion of the securities to yield 6.425 percent, according to a person familiar with the transaction who declined to be named because terms aren’t set.

The Southeast Asian nation has already sold dollar bonds twice in 2009 as an economic slump curbed tax revenue and public spending increased. This year’s budget deficit may exceed the government’s 250 billion pesos ($5.4 billion) forecast because additional funds are needed to repair damage caused by storms in the past month, Finance Secretary Gary Teves said two days ago.

“Now’s as good a time as any, with ultra-low interest rates in the U.S. and investor appetite for emerging-market risk rising,” said Paul Joseph Garcia, who helps manage about $1.4 billion at ING Investment in Manila. The fund manager said he placed an order for the notes being sold today.

The 4.5 percent U.S. government bond maturing February 2036, the Treasury with the closest maturity date to debt being sold by the Philippines, yielded 4.31 percent in recent trading.

Record-Low Yields

The Philippines sold $1.5 billion of 10-year notes in January and $750 million worth of similar-dated debt in July. Yields on the securities fell to their lowest levels today, making it more attractive for the government to raise funds overseas.

The yield on the country’s 6.375 percent dollar debt due 2032, currently the longest-dated foreign-currency note issued by the Philippines, reached 6.31 percent on Oct. 14, according to JPMorgan Chase & Co. That’s the lowest since the note was sold in January 2007.

The Philippines’ budget shortfall this year may reach a “worst case” 300 billion pesos, Teves said on Oct.14. The government is also considering a $500 million sale of yen- denominated bonds before year-end to help fund next year’s deficit, he said.

Moody’s Investors Service in July raised the Philippine foreign- and local-currency ratings by one notch to Ba3, three levels below investment grade and putting the country on a par with Turkey and Uruguay. Moody’s cited rising remittances from Filipinos living overseas as key to the upgrade.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net; Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

Last Updated: October 16, 2009 10:38 EDT