Bloomberg News

Philippine Bonds Drop on Interest-Rate Outlook; Peso Strengthens

April 13, 2012

Philippine bonds declined on speculation the central bank will refrain from further interest- rate cuts as a recovery in overseas sales improves the nation’s growth outlook. The peso strengthened.

Exports (PHEXYOY) increased at the fastest pace in 10 months in February, with shipments abroad rising 14.6 percent from a year earlier, a report showed yesterday. The Philippines will consider keeping borrowing costs steady as high oil prices threaten to spur cost pressures, central bank Governor Amando Tetangco signaled last month. Consumer prices rose 2.6 percent in March from a year earlier, the least since 2009, official data show.

“The market feels the rate cutting-cycle has stopped,” said Rafael Algarra, executive vice president of financial markets at Security Bank Corp. in Manila. “There’s been some selling, especially of the longer-dated debt.”

The yield on the 8 percent bonds due July 2031 rose four basis points, or 0.04 percentage point, to 6.08 percent as of 4:55 p.m. in Manila, according to Tradition Financial Services. The yield increased 11 basis points from April 4, with data unavailable for April 5 and 6.

The peso strengthened 0.1 percent to 42.655 per dollar, taking its weekly advance to 0.3 percent, prices from Tullett Prebon Plc showed. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged for a seventh day at 5.7 percent.

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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