Philippine government bonds dropped, with the three-year yield rising by the most in a month, before data forecast to show inflation is accelerating. The peso fell.
Consumer prices rose 3.3 percent in February from a year earlier, compared with a 3 percent increase in January, according to the median estimate of 16 economists surveyed by Bloomberg before an official report due tomorrow. That would be the fastest pace since September. Slightly more than $85 billion in U.S. government spending cuts began March 1 amid a more than two-year-old impasse over raising taxes and cutting entitlements.
“Expectations of higher inflation is driving up yields in the short term,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “The sequester issue is reducing demand for the peso, which also played a role in driving up yields.”
The yield on the 9.125 percent bonds due September 2016 advanced five basis points, or 0.05 percentage point, to 3.1 percent as of 4:23 p.m. in Manila, according to prices from Tradition Financial Services. That was the biggest increase since Feb. 1.
The peso fell 0.2 percent to 40.775 per dollar, according to prices from Tullett Prebon Plc. The currency touched 40.823, the weakest level since Jan. 29. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, increased three basis points to 3.99 percent, according to data compiled by Bloomberg.
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