Bloomberg News

Philippine Bonds Drop as Rate Cut Seen Unlikely: Manila Mover

April 16, 2012

Philippine bonds fell the most in more than three weeks after the central bank signaled it won’t cut borrowing costs this week. The peso declined.

The bank’s policy “remains appropriate, but we need to see how past policy actions are filtering to the economy,” Governor Amando Tetangco said in an e-mailed reply to questions before the April 19 meeting. Bangko Sentral ng Pilipinas will keep its overnight borrowing rate at 4 percent, according to all 17 economists surveyed by Bloomberg. Policy makers cut the rate by 25 basis points at each of the past two meetings.

“If forecasts don’t change drastically for growth and inflation, I don’t think there is a need for rates to be moved at this time,” said Enrico Tanuwidjaja, a Singapore-based senior currency analyst at Malayan Banking Bhd. “There could be some unwinding of Philippine bonds.”

The yield on the Philippines’ 8 percent securities due July 2031 increased seven basis points, or 0.07 percentage point, to 6.15 percent as of 4:37 p.m. in Manila, according to prices from Tradition Financial Services. That was the biggest decrease since March 22. Philippine notes have returned 13.7 percent in the past year, the second-best among 11 Asian local-debt indexes compiled by HSBC Holdings Plc.

Inflation slowed to a 30-month low of 2.6 percent in March, while exports increased in February by the most in 10 months, government reports show.

The peso snapped a three-day advance as an increase in Spanish bond yields fueled concern Europe’s debt crisis will worsen. The currency weakened 0.3 percent to 42.778 per dollar, according to Tullett Prebon Plc. One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 5.70 percent.

“There’s risk aversion because of the Spanish debt,” said Tanuwidjaja.

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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