Bloomberg News

Philippine Bonds Fall as Central Bank May Refrain From Easing

March 02, 2012

Philippine bonds fell on speculation the central bank will refrain from cutting interest rates amid concern costlier oil will stoke inflation. The peso gained.

The yield on the 8 percent debt due July 2031 climbed to a one-month high after Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said yesterday monetary policy will have to deal with inflation should increasing oil costs lead to a “disanchoring of expectations.” The central bank lowered its benchmark rate yesterday for a second straight meeting to 4 percent. Crude prices jumped 25 percent in New York in the past six months.

“It looks like we’re seeing the end of rate cuts and bonds may lose support from the BSP’s accommodative policy,” said Jan Briace Santos, a fixed-income trader who helps manage the equivalent of $16 billion at BPI Asset Management Inc. in Manila.

The yield rose nine basis points, or 0.09 percentage point, to 5.765 percent as of 4 p.m. in Manila, its highest level since Feb. 2, according to Tradition Financial Services. The rate climbed 14 basis points this week.

The peso rose 0.3 percent this week to 42.693 per dollar, according to Tullett Prebon Plc. It gained 0.3 percent today.

Inflation data due March 6 may show consumer prices rose 3.2 percent from a year earlier in February, according to the median estimate of economists surveyed by Bloomberg. January’s increase of 3.9 percent was the smallest in 13 months.

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

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


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