Philippines sell a record 78 bil. pesos of retail bonds; bonds, peso advance

Sales to banks and individuals of the so-called retail bonds will be limited to about 90 billion pesos, Tan said in an interview in the southern city of Cebu. The previous record for a sale of the notes was 77.7 billion pesos, set in 2007. The government's benchmark five-year debt rose the most in two weeks and the peso climbed to a one-month high.

“This will give a lot of elbow room to the Bureau of the Treasury in terms of managing its borrowing program in the fourth quarter,” said Joric Nazario, treasurer at Philippine Veterans Bank in Manila. “We can expect yields to decline if supply is lessened. The long end of the yield curve may flatten.”

The government predicts its budget deficit will swell to a record 250 billion pesos this year as public spending climbs and tax receipts slump amid an economic downturn. Gross domestic product rose 1.5 percent in the second quarter from a year earlier, after expansion slowed to a decade-low 0.6 percent in the previous three months.

The yield on the 6.25 percent debt due January 2014 fell nine basis points, or 0.09 percentage point, to 6.055 percent as of 3:32 p.m. in Manila, according to Tradition Financial Services. The peso climbed 0.6 percent to 48.05 per dollar.

Higher Remittances

The currency is likely to strengthen 3.3 percent to 46.50 by the end of the year on increased remittances from the more than 8 million Filipinos that live overseas, according to Security Bank Corp. treasurer Rafael Algarra. The payments rose 9.3 percent from a year earlier in July, the biggest gain in seven months, the central bank said yesterday.

The Philippines yesterday auctioned 25 billion pesos of the retail bonds, which are sold in 5,000 peso denominations that make them affordable for smaller investors. Yields were set at 5.25 percent for the three-year debt, 6.25 percent for five-year notes and 7 percent for seven-year bonds. The government said it would sell additional bonds at the same yields over as many as five days starting today.

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