Bloomberg News

Philippine Peso Gains Most in 15 Months on Europe; Bonds Rally

September 28, 2011

Sept. 28 (Bloomberg) -- The Philippine peso strengthened the most in 15 months on speculation signs of progress in tackling Europe’s debt crisis will revive demand for emerging- market assets.

Greek Prime Minister George Papandreou won support in parliament yesterday for a new property tax to help raise revenue and narrow the nation’s budget deficit. Bangko Sentral ng Pilipinas’ basic policy is to let the market determine the exchange rate, Governor Amando Tetangco said today. Government bonds rallied by the most in 11 weeks after Tetangco said the central bank’s monetary-policy stance can be maintained for the rest of the year, suggesting a rate increase is unlikely.

“People are taking the recent developments in Europe positively,” said Antonio Espedido, a treasurer at China Banking Corp. in Manila. “There’s more demand for riskier assets, which is benefiting emerging markets like the Philippines.”

The peso gained 0.9 percent to 43.455 per dollar as of the 4 p.m. close in Manila, it biggest gain since June 21, 2010, according to Tullett Prebon Plc. Emerging-market Asian currencies strengthened yesterday, when financial markets in the Philippines were shut due to a typhoon.

The local currency remains broadly competitive, Tetangco said today in Tokyo, adding that capital flows out of Asia are temporary.

The central bank held its benchmark rate at 4.5 percent this month for a third straight meeting after raising it twice earlier this year.

The yield on the government’s 5.875 percent bonds due January 2018 dropped 30 basis points, or 0.30 percentage point, to 5.20 percent, according to Tradition Financial Services. That was the biggest decline since July 11.

Bond Sales

The government may raise at least 50 billion pesos ($1.2 billion) to 60 billion pesos from the sale of bonds targeted at individuals by the second or third week of October, Deputy Treasurer Eduardo Mendiola told reporters today.

It may offer retail bonds due in 10- and 15-years, Mendiola said after the debt auction. The government received proposals from two groups about the sale of debt targeted to individuals and will probably select arrangers this week, Mendiola said. The government’s fourth-quarter auction schedule won’t be affected by the retail debt offer, he said.

The Philippines sold 9 billion pesos of 7.625 percent bonds due September 2036 today, according to the Bureau of the Treasury. Bids totaled 30.8 billion pesos, allowing the government to sell all the debt on offer.

--Editors: Andrew Janes, Simon Harvey

Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

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


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