Bloomberg News

Philippine Peso Strengthens on U.S. Budget Optimism; Bonds Rise

November 19, 2012

The Philippine peso strengthened, snapping a five-day decline, as speculation the U.S. will resolve its budget deadlock spurred demand for riskier assets.

The currency advanced the most since Oct. 25 as the nation reported a sixth straight month of surplus in its balance of payments. Asian stocks rose the most in a month after President Barack Obama expressed confidence he and Congress would reach an agreement to avoid the so-called fiscal cliff involving $607 billion of spending cuts and tax increases.

“The situation in the U.S. could turn out to be a long grind but people are hopeful there won’t be a breakdown,” said Patrick Ella, an economist in Manila at Security Bank Corp. “There’s better sentiment.”

The peso appreciated 0.4 percent to 41.19 per dollar in Manila, according to data from Tullett Prebon Plc. The currency fell 0.7 percent last week, the most since the five-day period ended Aug. 17. It may trade between 41.15 and 41.40 this week, Ella said.

One-month implied volatility, a measure of exchange-rate swings used to price options, fell to 4.6 percent from 4.7 percent on Nov. 16, according to data compiled by Bloomberg.

The Philippines had balance of payments surpluses of $604 million in October and $6.43 billion in the first 10 months, according to official figures released today.

The yield on the 5.875 percent bonds due March 2032 declined one basis point, or 0.01 percentage point, to 5.64 percent, according to Tradition Financial Services.

The treasury plans to sell 9 billion pesos ($218 million) of seven-year bonds tomorrow, according to its sales calendar. It last sold similar-maturity notes on Aug. 28 at an average yield of 4.662 percent and canceled an auction on Oct. 23.

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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