the Philippine Peso, Bonds Climb After Fitch Raises Debt Rating

Fitch Raises Debt Rating of the Philippines - Philippine Peso & Bonds Climb up!

The Philippine peso rose the most this week since April and bonds rallied after Fitch Ratings raised the nation’s debt rating to one level below investment grade yesterday.

Three-year notes had their best day in more than two months after Fitch lifted the long-term foreign-currency rating to BB+ from BB, citing the government’s efforts to reduce its budget deficit. The Philippines reported a budget surplus of 61 million pesos ($1.4 million) in the first four months of this year, compared with a deficit of 131.80 billion pesos a year earlier.

“The upgrade was another show of confidence in the administration’s concerted efforts to set the public books in order,” said Radhika Rao, an economist at Forecast Pte in Singapore. “The rally in bonds can be sustained if the fiscal numbers also reflect the trend of smaller deficits.”

The peso strengthened 0.6 percent this week, the most since the five days ended April 29, to 43.417 per dollar at the 4 p.m. close of trading, according to Tullett Prebon Plc. The currency advanced 0.2 percent today.

Fitch’s upgrade puts the Philippines on a par with Indonesia and follows a similar move by Moody’s Investors Service on June 15. The Philippines will strive to achieve an investment rating “at the soonest possible time,” Finance Secretary Cesar Purisima said yesterday.

The yield on the 6.25 percent notes due January 2014 fell 18 basis points, or 0.18 percentage point, to 4.52 percent, the lowest level since May 2, according to Tradition Financial Services. Today’s drop is the biggest since April 13, completing the bond’s third weekly decline in yields.

The government will consider selling bonds aimed at overseas Filipinos as it did last year, Purisima said yesterday, citing demand from nationals abroad. The Philippines will be “opportunistic” in selling debt, he said.

To contact the reporter for this story: Clarissa Batino in Manila at cbatino@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net