Bloomberg News

Philippine 5-Year Bonds Gain on Inflation Report; Peso Rebounds

October 05, 2011

Oct. 5 (Bloomberg) -- Philippine bonds rose as a government report showed consumer prices increased less than economists forecast, allowing policy makers to keep interest rates low to support growth.

Annual inflation was 4.8 percent in September, compared with 4.7 percent in August, the statistics office said today. Economists surveyed by Bloomberg News predicted the rate at 4.9 percent. Price pressures fanned by storms that lashed the Southeast Asian country last week may not persist, the central bank said today. The peso gained the most in a week after President Benigno Aquino said the nation’s economic fundamentals are “still solid.”

“The latest inflation data is supportive of our call that the tightening phase of the monetary board may be over for the year,” said Ryanna Berza-Talan, a bond-fund manager at Banco de Oro Trust in Manila. “It is positive for the bond market.”

The yield on the 9.125 percent note due September 2016 dropped 1.5 basis point, or 0.015 percentage point, to 5.125 percent in Manila, according to Tradition Financial Services. The rate on the 8 percent bond due July 2031 fell three basis points, or 0.03 percentage point, to 7.275 percent.

The inflation “reading is slightly below market expectations and this will give the central bank some leeway to spur economic growth,” said Eugene Leow, an economist in Singapore at DBS Group Holdings Ltd. “Interest rates will likely stay on hold for the rest of the year given the negative external headwind.”

Debt Sales

The government plans to sell 10- and 15-year bonds to individuals this month to raise at least 60 billion pesos ($1.4 billion), Deputy Treasurer Eduardo Mendiola said on Oct. 3. It hired 10 banks to manage the sale and pricing may take place on Oct. 10, he said.

The peso strengthened 0.5 percent to 43.868 per dollar in Manila, according to Tullett Prebon Plc. It fell yesterday to an eight-month low of 44.215. The currency remains within a “tolerable range,” Aquino told reporters in Bulacan province north of Manila today.

Federal Reserve Chairman Ben S. Bernanke said yesterday U.S. policy makers were prepared to take more steps to support the recovery in the world’s largest economy. Eleven of 52 economists surveyed by Bloomberg said the European Central Bank will cut its benchmark interest rate by at least a quarter- percentage point from the current level of 1.5 percent at a meeting tomorrow. The others expect no change.

Bangko Sentral ng Pilipinas is “watchful of policy developments to resolve the European debt crisis as these could impact on risk appetite and capital flows in emerging market economies, including the Philippines,” Governor Amando Tetangco said in a mobile-phone message today.

--With assistance from Clarissa Batino and Joel Guinto in Manila. Editor: Anil Varma

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To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan16@bloomberg.net


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