Bloomberg News

Philippine Peso Falls Most in a Year on Europe; Bonds Advance

December 09, 2011

Dec. 9 (Bloomberg) -- The Philippine peso fell the most in more than a year on concern European policy makers will struggle to contain the region’s debt crisis, hobbling the global economic recovery. Local-currency bonds gained.

The currency had a weekly loss as European leaders worked on a “fiscal compact” at a summit in Brussels to address the crisis and after the European Central Bank damped speculation it would step up bond purchases. The slowdown in Europe is sapping demand for Philippine exports. Government bonds advanced this week on optimism the central bank will cut interest rates next year to help shore up growth.

“The peso has been affected by the euro-zone situation,” said Speedy Delfino, a fixed-income trader at East West Bank in Manila. “As for bonds, they have rallied on slower inflation, plus the central bank comments that they can afford to ease in the first quarter.”

The peso weakened 0.8 percent to 43.63 per dollar at the close in Manila, dropping the most since November 2010, according to Tullett Prebon Plc. The currency declined 0.8 percent this week, paring its gain this year to 0.4 percent.

A government report on Dec. 13 will show Philippine exports fell 16.9 percent in October from a year earlier, according to the median forecast of eight economists surveyed by Bloomberg. Shipments slumped 27 percent in September, the worst performance since April 2009.

Inflation Slows

Consumer-price gains slowed to 4.8 percent in November from a year earlier, compared with 5.2 percent in October. Demand surged at a sale of 25-year bonds on Dec. 6, allowing the government to borrow at the cheapest cost since at least 2000.

The yield on the government’s 8 percent note due July 2031 declined 11 basis points, or 0.11 percentage point, to 6.22 percent, according to Tradition Financial Services. The rate fell 42 basis points this week.

Bangko Sentral ng Pilipinas kept its overnight rate at 4.5 percent at its Dec. 1 meeting, unchanged since May. The central bank is open to easing monetary policy next year, Governor Amando Tetangco said on Dec. 6.

The Philippines may sell zero coupon bonds next year, Deputy Treasurer Eduardo Mendiola said in an interview today. The Bureau of the Treasury plans to reduce the amount of debt it will sell in 2012, he said.

--With assistance from Clarissa Batino in Manila. Editors: Andrew Janes, Sandy Hendry

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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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