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Philippines Shuns All Bids at Bond Sale for 1st Time Since 2012

The Philippines rejected all bids at a sovereign bond sale today for the first time since June 2012, underlining the strength of the government's finances even as the country recovers from Super Typhoon Haiyan.

The yield on the 2.125 percent notes due May 2018 would have been 2.997 percent had the government sold the 30 billion pesos ($686 million) on offer, Treasury data show. That compares with a secondary-market rate of 2.775 percent, based on prices from Philippine Dealing & Exchange Corp., and 3.002 percent at the last sale in September. There were 46.5 billion pesos of bids for today’s offer.

“There’s no reason we should pay higher than the market,” Deputy Treasurer Eduardo Mendiola told reporters in Manila. “We can afford to reject. We have enough cash balance.”

Philippine peso bonds are the best-performing notes in Asia excluding Japan this year, returning 8.2 percent, according to 10 debt indexes compiled by HSBC Holdings Plc. The government is ending 2013 with a good cash position, giving it the flexibility to reduce borrowing in the first quarter, Treasurer Rosalia de Leon said Nov. 25.

The administration can afford to reject the bids because it had excess cash of 266 billion pesos in the first nine months of the year after the payment of maturing liabilities, Joey Cuyegkeng, an economist in Manila at ING Groep NV, said in an interview today, citing official data.

Reconstruction Budget

The government will spend an initial 40.9 billion pesos this year rebuilding areas devastated by Haiyan, Communications Secretary Sonny Coloma said Nov. 30. Money for the reconstruction has already been raised from donations and calamity funds, Deputy Treasurer Mendiola said today.

“It was a good move, sending a strong signal to the market that the government is awash with cash and is equipped to fund the post-storm reconstruction,” said Dave Estacio, assistant vice president at First Metro Investment Corp. in Manila. “The government probably raised more than enough this year and has room to keep borrowing under control into 2014.”

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Max Estayo in Manila at mestayo@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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