Bloomberg News

Philippine Bonds Advance on Rate-Cut Outlook; Peso Declines

February 01, 2012

Feb. 1 (Bloomberg) -- Philippine government bonds rose on speculation demand for debt will increase as slowing inflation stoked speculation policy makers will lower interest rates. The currency declined.

Benchmark 10-year notes rallied for a fourth month in January, pushing yields toward a record-low after Bangko Sentral ng Pilipinas cut its benchmark overnight rate to 4.25 percent from 4.5 percent and as President Benigno Aquino seeks to win a credit-rating upgrade. A government report on Feb. 7 may show gains in consumer prices cooled for a third month in January, according to a Bloomberg News survey.

“Traders see BSP cutting rates in the near term as inflation is within manageable levels,” said Speedy Delfino, a bond trader at East West Banking Corp. in Manila. “There’s pressure for the authorities to support growth as the government is aiming for an investment-grade rating this year.”

The yield on the 6.375 percent notes maturing in January 2022 dropped three basis points, or 0.03 percentage point, to 5.11 percent as of 4 p.m. in Manila, according to Tradition Financial Services. The rate reached 5.09 percent on Dec. 22, the least since the securities were sold in July.

The Bureau of the Treasury will offer as much as 9 billion pesos ($210 million) of 20-year debt today. It sold 9 billion pesos of February 2032 notes yesterday, drawing more than four times that amount in bids from investors.

The central bank isn’t ruling out another interest-rate cut this quarter “considering the conditions,” Governor Amando Tetangco told reporters today. It is prepared to take more steps to support growth, he said yesterday.

Inflation, Peso

Consumer prices probably rose 4 percent in January from a year earlier, based on a Bloomberg News survey, compared with 4.2 percent in December. The central bank will hold its next policy meeting on March 1.

The peso fell 0.2 percent to 42.945 per dollar, according to Tullett Prebon Plc, after appreciating 2.3 percent in January. It touched 42.72 on Jan. 30, the strongest level since Oct. 28.

The local currency declined, tracking losses in regional currencies as data including an export slump in South Korea and Thailand signaled economic growth is slowing in most of the region’s economies.

--Editors: Sandy Hendry, Simon Harvey

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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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