Bloomberg News

Philippine Bonds Rise, Peso Falls on Scope for Monetary Easing

October 26, 2011

Oct. 26 (Bloomberg) -- Philippine bonds rose after the central bank signaled there’s room for Asian central banks to ease monetary policy and data showed the nation’s budget deficit narrowed in the first nine months of the year. The peso fell.

Asia has scope to cut interest rates and boost spending as consumer-price gains slow, central bank Governor Amando Tetangco said in a speech yesterday in Manila. The nine-month deficit was 52.99 billion pesos ($1.2 billion), or about 20 percent of the level a year earlier, the government reported yesterday after investors increased bids at a treasury debt auction.

“The outlook for easing inflation gives the central bank the flexibility to keep the benchmark rate at least steady through 2012,” said Dave Estacio, chief fixed-income dealer at First Metro Investment Corp. in Manila. “The 25-year auction showed strong appetite for long-term notes and the budget report supported the momentum.”

The yield on the 8 percent securities due July 2031 fell seven basis points, or 0.07 percentage point, to 6.92 percent as of 4:19 p.m. in Manila, the lowest level in two weeks, according to Tradition Financial Services. The peso dropped 0.2 percent to 43.205 per dollar, prices at Tullett Prebon Plc showed.

Philippine inflation is manageable and monetary policy is supportive of economic growth, Tetangco said yesterday. The inflation outlook is “slightly tilted to the downside” and latest forecasts show the target of 3 percent to 5 percent until 2013 will be met, he said last week.

Bangko Sentral ng Pilipinas kept its overnight borrowing rate at 4.50 percent on Oct. 20, as predicted by all 17 economists in a Bloomberg News survey. The final policy meeting for this year is scheduled for Dec. 1.

The Bureau of the Treasury sold all the 9 billion pesos of 7.625 percent 2036 notes on offer yesterday, fetching bids for almost three times that amount. The average yield was 7.131 percent, compared with 7.51 percent when the securities were first issued last month.

The government will report October inflation on Nov. 4.

--Editors: Simon Harvey, Andrew Janes

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To contact the reporters responsible for this story: Clarissa Batino at cbatino@bloomberg.net

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


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