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Philippine Bonds Drop as Widening Deficit Signaled; Peso Gains

Philippine 10-year bonds fell, pushing yields to the highest level in more than three weeks, as the government said the budget deficit widened in December. The peso touched a two-month high.

Last year’s shortfall was probably around 191.6 billion pesos ($4.4 billion), Budget Secretary Butch Abad said today ahead of the release of official data. That compared to a government report last month that said the deficit for the year through November was 96 billion pesos.

“It’s natural that bids will be more defensive,” said Angeline Sia, a fixed-income trader who helps manage the equivalent of $15 billion at BPI Asset Management Inc. in Manila. “Traders will start looking at the government’s finances more closely and look at whether higher spending translated to stronger growth.”

The yield on the 6.375 percent bond due January 2022 rose three basis points, or 0.03 percentage point, to 5.25 percent, in Manila, according to Amstel Financial Services. That was the highest level since Jan. 2. The peso rose 0.1 percent to 43.115 per dollar, according to Tullett Prebon Plc. It touched 43.045, the strongest level since Nov. 9.

The Philippine economy may have grown at the slowest pace since 2009 last year as exports contracted, Ruperto Majuca, assistant director-general at the National Economic and Development Authority, said today. Gross domestic product may have increased 3.6 percent to 4 percent in 2011, he said. The economy expanded 7.3 percent in 2010, official data show. The government is scheduled to release the GDP data on Jan. 30.

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