ASIA LOCAL BONDS-Thai yields after c.bank, Manila weakens

HONG KONG, Nov 5 (Reuters) - Thai bond yields fell on Thursday after the central bank chief said official interest rates were unlikely to rise this year due to risks to its economic recovery.

Phiilippine bonds ended weaker, with the longer-dated yields rising on profit-taking. After the market closed, the central bank announced it had kept rates unchanged, in line with market expectations. [ID:nSP545719]

FOREIGNERS SELL THAI DEBT

Bank of Thailand Governor Tarisa Watanagase told Reuters in an interview that the current policy rate of 1.25 percent, a record low, is not hindering the recovery and inflation is not a concern. [ID:nBKK196535].

The comments pushed the 10-year yield TH10YT=RR down 5 basis points to 4.45 percent.

But traders said the decline was capped on concerns over recent selling by foreign investors, which local dealers have attributed to position consolidation.

"The comments on interest rates was comforting but foreign selling continues to be a matter of concern," said a local trader.

Foreigners sold a net 2 billion baht ($300 million) worth of bonds so far this week, according to Thai bond dealer association data. Last week, they sold 1.5 billion baht taking October's net sales to 17.8 billion baht.

SHORT YIELDS RISE

Philippines bonds lost ground towards the closing hours of the session as investors took profits from the recent rally, Manila-based dealers said.

The 5-year benchmark bond yield PH5YT=RR gained 2 basis points to 6.50 percent and ten-year yield PH10YT=RR rose by 6 basis points at 8 percent, they said. Five-year bond yields have fallen 12 basis points since over the past month.

Like its Indonesian counterpart on Wednesday, the central bank's statement showed it was in no hurry to raise rates with inflation pressures still benign in the medium term, said Yvette Marquez, senior fixed-income trader at BPI Asset Management in Manila.

"The rate decision wasn't a surprise and our house call is that the BSP will start hiking rates some time in the second half of next year," Marquez said, adding 10-year yields were expected to trade in a broad 7.75-8.25 percent until end 2009.

But one-year yields PH1YT=RR resumed their upward march to fresh four-month peaks at 4.77 percent on speculations of some liquidity tightening measures in the coming weeks.

"Liquidity management in our opinion will be a crucial policy consideration given price stability ramifications further out," said Vishnu Varathan, economist at Forecast at Singapore.

The one-year yield has risen by 23 basis points so far this week and the yield curve PHBMK= has flattened over the past month. (Reporting by Saikat Chatterjee; Editing by Kazunori Takada)