Philippine Bonds Rise on Government Pledge to Meet Budget-Deficit Target

Philippine four-year bonds rose, snapping a three-day drop, after a government pledge to meet this year’s budget-deficit target damped concern debt sales will be stepped up. The peso weakened.

President Benigno Aquino’s three-week-old administration is sticking to its 325 billion peso ($7 billion) budget-deficit ceiling this year even and will push revenue agencies to bolster collection, Treasurer Roberto Tan said today. The six-month deficit widened to 196.7 billion pesos, exceeding a forecast of 178.5 billion pesos made by the last government, a report showed.

“It’s signaling that they’re responsible and committed to containing the deficit number to the target they have publicized,” said Antonio Espedido Jr., treasurer at China Banking Corp. in Manila.

The yield on the 6.25 percent bond due in September 2014 dropped five basis points, or 0.05 percentage point, to 5.95 percent in Manila, according to Tradition Financial Services. The rate reached a two-week high of 6 percent yesterday.

The Philippines must start turning away from a loose monetary policy setting amid faster economic growth, the International Monetary Fund said yesterday. Bangko Sentral ng Pilipinas maintained its benchmark interest rate at a record-low 4 percent last week and Governor Amando Tetangco said yesterday there’s “no urgency” to raise borrowing costs as the inflation outlook remains “favorable.”

The peso slid 0.1 percent to 46.475 per dollar, according to prices from inter-dealer broker Tullett Prebon Plc.

To contact the reporter for this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net.

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