Bloomberg News

Philippine Peso Climbs to Three-Month High on Rates; Bonds Gain

February 02, 2012

Feb. 2 (Bloomberg) -- The Philippine peso rose to a three- month high as speculation policy makers will cut borrowing costs to support economic growth spurred demand for the nation’s assets. Ten-year bonds gained.

Foreign funds bought $372 million more local stocks than they sold this year through yesterday, according to exchange data. The central bank, which lowered its benchmark rate last month for the first time since 2009, isn’t ruling out another reduction this quarter, Governor Amando Tetangco said yesterday after a report this week showed economic growth slowed in 2011.

“For the Philippines, the positive credit fundamentals are helping, meaning yields are still low, supporting local equities,” said Estelito Biacora, senior vice president and head of private banking in Manila at Bank of the Philippine Islands. Foreign investors “are still keeping their holdings in Philippine bonds,” he said.

The peso appreciated 0.7 percent to 42.662 per dollar at the close in Manila, according to Tullett Prebon Plc. It touched 42.660 earlier, the strongest level since Nov. 1. The currency has advanced 2.8 percent this year.

Bangko Sentral ng Pilipinas lowered the rate it pays lenders for overnight deposits by a quarter of a percentage point to 4.25 percent on Jan. 19. The Philippine economy grew 3.7 percent in 2011, compared with a revised 7.6 percent expansion a year earlier and a government target of at least 4.5 percent, a report showed on Jan. 30.

Bonds Advance

The yield on the 6.375 percent debt due January 2022 fell six basis points, or 0.06 percentage point, to 5.05 percent, to prices from Tradition Financial Services.

Philippine Treasurer Roberto Tan said yesterday the nation’s bonds, Asia’s second-best performers in the past year, will probably advance in 2012 as the country wins an investment- grade rating and the government borrows less.

The Bureau of the Treasury sold 9 billion pesos ($211 million) of 20-year notes on Jan. 31 at an average yield of 5.906 percent, compared with 8.024 percent when such securities were last sold a year earlier.

--Editors: Anil Varma, Andrew Janes

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

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


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