Philippine Bonds Halt Six-Day Rise on Speculation Gains Overdone

The Philippine government’s 2031 bonds halted a six-day advance on speculation the rally that sent yields to the lowest level since July 2011 was overdone.

The yield on the 8 percent notes dropped 72 basis points, or 0.72 percentage point, in the last six days and climbed 14 basis points to 3.93 percent as of 4:09 p.m. in Manila, according to prices from Tradition Financial Services.

The Bureau of Internal Revenue reported March 19 that tax collections were 74.5 billion pesos ($1.8 billion) in February, 3.4 percent short of target. The balance of payments slipped to a deficit last month for the first time since April, data the same day showed. Investors betting sovereign notes will rally if the nation wins investment grade may be disappointed because they already yield less than better-rated governments, said Thiam Hee Ng, a senior economist at the Asian Development Bank.

“The yield had fallen quite a bit and that’s why any negative news may cause a rebound in yields,” said Rees Kam, a strategist at SJS Markets Ltd., a Hong Kong-based financial services company that specializes in fixed income. “Taxes fell short of target.”

Philippine government bonds have returned 12.6 percent this year, the best performance among 10 Asia debt indexes compiled by HSBC Holdings Plc. The nation’s 10-year notes yield 3.5 percent, compared with 3.59 percent in Thailand and 5.47 percent in Indonesia.

The Philippines is rated Ba1, or junk, by Moody’s Investors Service, while Thailand and Indonesia are rated investment grade by the company.

The peso was little changed at 40.748 per dollar, compared with 40.738 yesterday, according to Tullett Prebon Plc. It has appreciated 5.6 percent in the past year, the biggest gain among emerging-market currencies. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped six basis points to 3.75 percent.

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