Bloomberg News

Philippine Peso, Bonds Advance on Stimulus, Rating Speculation

September 04, 2012

The Philippine peso advanced to a three-week high on speculation the European Central Bank will announce new bond-buying plan this week and that faster growth at home will help the nation win a debt-rating upgrade.

The currency strengthened for a fourth day, the longest winning streak since July 18. ECB President Mario Draghi told lawmakers in Brussels yesterday he would be comfortable buying bonds with maturities of up to about three years, boosting demand for riskier assets. Federal Reserve Chairman Ben S. Bernanke said last week that he wouldn’t rule out more monetary easing to reduce unemployment in the U.S.

“We are looking at the support from investors shifting funds to Asia as well as mounting expectations for more quantitative easing in the U.S.,” said Ryanna Berza-Talan, a Manila-based fund manager at Banco de Oro Unibank Inc. “The prospect of an upgrade has accelerated the peso’s strength.”

The peso strengthened 0.2 percent to 41.903 per dollar as of 4:41 p.m. in Manila, data from Tullett Prebon Plc showed. It earlier reached 41.86, the highest since Aug. 13. One-month implied volatility, which measures exchange-rate swings used to price options, was little changed at 5.7 percent.

The Philippine economy grew 5.9 percent last quarter, after a 6.3 percent expansion in the first three months of 2012, the government said on Aug. 30, and compared with economists’ forecast for a 5.5 percent expansion.

Credit Rating

The nation’s foreign-currency debt rating was upgraded one level to Ba2 by Moody’s Investors Service in June last year, or two levels below investment grade. Standard & Poor’s raised its rating one step to BB+ on July 4 this year, or one level below investment grade.

The yield on the 8 percent bonds due July 2031 dropped for a third day, easing by one basis point or 0.01 percentage point to 5.60 percent, according to Tradition Financial Services. The yield touched a six-week high of 5.73 percent on Aug. 23.

Consumer prices probably rose 3.5 percent in August from a year earlier, after a 3.2 percent increase in July, according to the median forecast in a Bloomberg News survey of economists before official data due tomorrow. The central bank cut its benchmark rate by 25 basis points to a record low of 3.75 percent in July.

“Inflation is manageable and not really a problem,” Berza-Talan said. “We’re still at the lower end of the range,” based on the official target of 3 percent to 5 percent for 2012, she said.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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