Bloomberg News

Philippine Peso Drops This Week on Costlier Oil; Bonds Decline

February 24, 2012

Feb. 24 (Bloomberg) -- The Philippine peso slid for a second week on concern rising energy costs will damp economic growth. Government bonds declined.

The Philippines imports almost all of the oil it uses and the cost of crude climbed 10 percent since end-January in New York, reaching a nine-month high of $108.74 a barrel yesterday. The central bank signaled this week that it has room to support economic growth even as oil costs increase.

“If the rise in oil prices drags on, it’s not good for Asian currencies given the region’s high dependence” on energy imports, said Leong Sook Mei, the Singapore-based regional head of global currency research at Bank of Tokyo-Mitsubishi UFJ.

The peso weakened 0.5 percent this week to 42.825 per dollar in Manila, according to Tullett Prebon Plc. The currency lost 0.1 percent today.

“Our assessment is, under specific stressed oil price levels, inflation would be elevated but the full-year inflation average would be within target,” central bank Governor Amando Tetangco said on Feb. 22. Policy makers are aiming to keep inflation between 3 percent and 5 percent this year.

Twenty-year government bonds dropped this week after the Bureau of the Treasury allowed yields to rise at an auction to individual investors on Feb. 21 to spur demand for the debt.

The yield on the government’s 5.875 percent bonds due February 2032 increased 10 basis points, or 0.10 percentage point, this week to 5.93 percent, according to noon fixing prices from the Philippine Dealing & Exchange Corp. The rate fell nine basis points today.

The government set the yield on 15-year securities at 5.375 percent and that for 20-year bonds at 5.875 percent at the auction. The Philippines sold a total 163 billion pesos ($3.8 billion) of the notes to individual investors as of late yesterday, First Metro Investment Corp. President Roberto Juanchito Dispo, one of the arrangers, said today.

Total sales may approach 200 billion pesos, including purchases by state-owned companies, Dispo said.

--Editors: Anil Varma, James Regan

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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