Bloomberg News

Philippine Peso Drops on S&P Move, Inflation News; Bonds Gain

December 06, 2011

Dec. 6 (Bloomberg) -- The Philippine peso fell to a one- week low after Standard & Poor’s said it may downgrade the ratings of 15 European nations amid the region’s debt crisis.

Government bonds rose after data showed inflation slowed last month and central bank Governor Amando Tetangco said interest rates may be cut early next year to help the economy. The Manila-based Asian Development Bank trimmed its growth forecasts for the Philippines, saying banks in the country have substantial exposure to Europe.

“The peso is reacting to the S&P rating news,” said Fernando Mangalindan, who trades sovereign bonds at Philippine Savings Bank in Manila. “The inflation report is good for the local bond market and we could see one rate cut in the first quarter of next year.”

The peso dropped 0.3 percent to 43.383 per dollar as of 10:19 a.m. in Manila, trimming this month’s advance to 0.6 percent, according to Tullett Prebon Plc. It touched 43.41, the weakest level since Nov. 29.

Asian Development Bank predicts the Philippine economy will expand 3.7 percent in 2011 and 4.8 percent in 2012, according to a report published today. The forecasts compare with September estimates for growth of 4.7 percent and 5.1 percent, respectively.

Consumer prices rose 4.8 percent in November from a year earlier, following a 5.2 percent gain in October, the statistics office said today. Economists had expected a 4.9 percent increase, based on the median estimate of economists in a Bloomberg News survey.

Bonds Gain

The inflation data and Tetangco’s comments are “negative for the peso and positive for government bonds,” Credit Agricole CIB said in a research note to clients. The French bank forecast a 50-basis point rate cut in 2012.

The yield on the government’s 9.125 percent bonds due September 2016 dropped five basis points, or 0.05 percentage point, to 4.70 percent, according to Tradition Financial Services.

The government is scheduled to sell 9 billion pesos ($207.4 million) of 2036 bonds today. The treasury last sold 25-year notes on Oct. 25 at an average yield of 7.131 percent.

--Editors: James Regan, Andrew Janes

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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: Sandy Hendry at shendry@bloomberg.net


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