ASIA LOCAL BONDS-Philippine yields seen falling on dollar bonds

HONG KONG, July 10 (Reuters) - Philippine bond yields are expected to fall next week after the government said it would likely pick underwriters for a $500 million global bond sale soon.

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VIEWS AND FLOWS

The announcement came just minutes before the market closed. The five-year bond yield was flat at 6.15 percent by late afternoon, while volume of trade was at 4 billion pesos, versus 8.3 billion for the whole of Thursday.

Traders said yields were likely to ease on Monday.

"There should be some easing of rates because the global issue will relieve some supply pressure in the domestic market," a Manila-based trader said.

National Treasurer Roberto Tan said the Philippines will likely sell $500 million in dollar bonds. The central bank gave the go-ahead on Friday for its plan to issue up to $1 billon in bonds to help to plug this year's budget deficit, a central bank source told Reuters. [ID:nMNA000295]

INDONESIA WEAKENS

Indonesian bond yields extended their falls but caution ahead of a government auction next week capped their declines, traders said.

The government will raise 2 trillion rupiah ($197.2 million) from the auction to help fund this year's budget deficit estimated at 2.5 percent of GDP. [ID:nJAK466649]

Yields fell by 20 to 30 basis points (bps) on Thursday on optimism that President Susilo Bambang Yudhoyono's win at Wednesday's election would ensure continuity of his policies, including a further easing of central bank rates.

Yudhoyono said on Thursday the central bank's rates could fall to as low as 6 percent by year end from 6.75 percent. [ID:nJAK381695]

"By and large, the sentiment remains positive. But the key factor now is who will run the key economic posts including the finance ministry and the central bank," a Singapore-based strategist said.

Some traders were sceptical about the possibility that the rates could fall to 6 percent this year.

"The market is still talking about 6.50 percent to 6.25 percent as the bottom for the central bank rate. There is a concern that if they bring it down too low, there will be a big adjustment if inflation starts to kick in and that will destablise the market," a Jakarta-based trader said.

By late afternoon, the yield on the five-year bond ID5YT=RR was down 5 bps to 9.25 percent, traders said.

(Reporting by Jun Ebias; Editing by Kazunori Takada)