Philippine Bonds Advance After Senate Approves Tax Increase Bill

Philippine bonds rose after the Senate approved a bill to increase excise taxes on tobacco and liquor, a move that officials said will boost revenue and the chances of winning an investment-grade rating.

The regulation may add an estimated 40 billion pesos ($972 million) to government coffers in the first year of implementation, Finance Secretary Cesar Purisima said in a statement today. Credit-rating companies have identified the bill as one of two measures that are important and will trigger rating upgrades and positive outlooks, Tax Commissioner Kim Henares said in October.

“Higher revenue means there will be less need for the government to borrow,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. in Manila. “With less pressure, interest rates will go down.”

The yield on the 4.75 percent bonds due September 2022 fell five basis points, or 0.05 percentage point, to 4.45 percent as of 4:22 p.m. in Manila, according to Tradition Financial Services. That’s the lowest level since the debt was sold in September.

Philippine local-currency notes have returned 7.6 percent this year, the third-best performance after Indonesia and India among 10 Asian debt indexes compiled by HSBC Holdings Plc.

Moody’s Investors Service raised the country’s credit rating to one step below investment grade in October, citing improved economic performance and rising revenue. The $225 billion economy expanded 6.1 percent in the first half of the year, heading for its fastest annual growth since 2010.

The peso rose 0.1 percent to 41.135 per dollar in Manila, data from Tullett Prebon Plc showed. One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 4.6 percent.

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