Philippine, Indonesian bonds weaken

Philippine, Indonesian bonds weaken

HONG KONG (Dow Jones): Philippine and Indonesian benchmark
bonds dipped this week because of continued social, political and
economic concerns, while other Asian benchmark bonds held firm in
overall thin summer trading.

The spread on Indonesia's 2006 benchmark against equivalent
U.S. Treasurys widened by 60 basis points Friday from a week ago
while the spread of the Philippines' 2008 bond widened by 45
basis points.

In the case of the Philippines, sentiment was weakened earlier
this week when the government suggested that it would exceed its
budget deficit forecast this year, said one trader in Manila.

The prospect of fresh supply weighed on the Philippines'
existing bonds, the trader said.

According to press reports, the Philippines plans to raise
US$500 million through the sale of bonds to Philippine investors
holding dollars locally in the form of foreign currency
depository units.

"All the bad news is coming on top of the old problems," the
trader said.

In addition to the new funding requirement, the government has
to rebuild investor confidence that has been battered by the
protracted Muslim insurgency in Mindanao, several bomb blasts and
the hostage crisis in Jolo Island.

In Indonesia, investor confidence suffered from Coordinating
Minister for Economy and Finance Kwik Kian Gie's statement that
the government is considering scrapping debt-settlement
agreements signed with a number of Indonesia's top business
groups.

Recent threats from the U.S. government to take legal action
against the Indonesian government to recover $290 million
provided an additional reason for investors to pull their money
out of Indonesian bonds.