MANILA/HONG KONG, Sept. 10 (Reuters) – The Philippine government said Friday it raised an equivalent of $1 billion from a maiden issue of a 2021 global peso bond, taking advantage of heavy foreign demand and record inflows into Asian debt markets.

The peso-denominated bonds, Asia's first global local currency debt issue, were priced at 99.607, with a coupon of 4.95 percent, to yield 5.0 percent, the government said in a statement. The deal puts Philippines in a small club of issuers who have sold bonds abroad in their own currencies.

Finance Minister Cesar Purisima said orders reached $13.3 billion – an amount if fully taken up would have roughly covered Manila's fiscal deficit target for 2010 nearly twice.

The bonds are likely to see some follow-through demand on Monday when local markets reopen with incremental buying from offshore investors seeking exposure to the peso and funds who were not able to subscribe to them.

Local investors are not expected to show much interest as the pricing for the global bond is equivalent to domestically sold government securities.

The yield at the final price was at the low end of the yield guidance of 5-5.25 percent.

The global peso bonds are exempt from payment of 20 percent withholding tax on local bonds which gives the international investors the same effective yield as they would get on purchases in the domestic market .

The bonds will be denominated in pesos and settled offshore in US dollars.

Manila said in a statement the book-building process for the offering took about 16 hours, with Asian investors taking up 37.1 percent of the offer, US investors buying 32.6 percent and 30.3 percent taken up by Europeans.

The appeal of the bond to foreign investors is clear – yields on the most actively traded benchmark 10-year bonds have dropped nearly 160 basis points so far this year to 6.48 percent while the peso has rallied more than 4.5 percent so far this year as one of the best performing Asian currencies.

Analysts said the sale would prompt other issuers to take this route especially those borrowers who want to diversify their investor base and reduce dependence on US dollar funding.

''It will be a good precedent for other countries which also have a withholding tax issue and are not included in the global emerging market bond indices such as Korea,'' said Eugene Kim, managing director of Tribridge Investment Partners who bought Philippine bonds and manages nearly $300 million in Asian debt.