Bloomberg News

Philippine Bonds Fall as Central Bank Signals Pause in Rate Cuts

March 12, 2012

Philippine bonds declined after the central bank signaled it will hold off from adding to this year’s two interest-rate cuts as higher oil costs pose a risk to inflation. The peso dropped.

Bangko Sentral ng Pilipinas Governor Amando Tetangco said March 10 that “high oil prices bear close watching.” Crude oil climbed 8 percent to $106.74 a barrel this year in New York, according to data compiled by Bloomberg. Philippine policy makers reduced the overnight borrowing rate by a quarter of a percentage point at each of the last two reviews, lowering it to 4 percent, the least in a year.

“There is some likelihood that interest rates will be pressured to go up,” said Antonio Espedido, treasurer at China Banking Corp. (CHIB) in Manila. “The market will have to evaluate the risks in view of the inflation outlook.”

The yield on the 5.875 percent debt due January 2018 rose five basis points, or 0.05 percentage point, to 4.65 percent as of 2:06 p.m. in Manila, according to Tradition Financial Services. The peso slid 0.2 percent to 42.658 per dollar, according to Tullett Prebon Plc.

Consumer prices in the Philippines, which imports most of its energy needs, rose 2.7 percent from a year earlier in February, the smallest increase since September 2009.

The nation’s debt-to-gross domestic product ratio will likely continue to decline, which is “credit positive,” Moody’s Investors Service said in e-mailed statement today.

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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