Oct. 27 (Bloomberg) -- The Philippine peso rose the most this month and government bonds advanced after European leaders agreed to expand a regional bailout fund, helping contain a debt crisis that sparked a sell-off in emerging-market assets.
French President Nicolas Sarkozy estimates the fund will be worth $1.4 trillion after European governments agreed on steps to leverage existing guarantees by as much as five times. The Philippines’ nine-month budget deficit was 52.99 billion pesos ($1.2 billion), or about 20 percent of the level a year earlier, the government reported this week.
“Risk appetite is back for now and bounces are most prominent in emerging markets, supported by strong domestic fundamentals,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. in Manila. “There’s no pressure for interest rates to rise in the Philippines because the government, the biggest borrower, has no need for funds.”
The peso gained 0.8 percent to close at a six-week high of 42.857 per dollar in Manila, according to Tullett Prebon Plc. That’s the best performance since Sept. 28. The yield on the government’s 8 percent bonds due July 2031 fell seven basis points, or 0.07 percentage point, to 6.845 percent, the lowest since the notes were issued in July, based on prices from Tradition Financial Services.
The Philippines has fiscal and monetary policy flexibility to help withstand a potential global economic slowdown, Finance Secretary Cesar Purisima said in a speech in Manila today. Central bank Governor Amando Tetangco said Europe’s plans to resolve its debt crisis may be “sufficient, at least in shoring up confidence and calm in the markets.”
Asia has scope to cut interest rates and boost spending as consumer-price gains slow, Tetangco said Oct. 25 in Manila. Philippine inflation is manageable and monetary policy is supportive of economic growth, he said.
Bangko Sentral ng Pilipinas is sticking to a plan to impose a 187.5 percent market-risk weight on non-deliverable currency forwards, Tetangco wrote in an e-mail yesterday.
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