Philippine government bonds fell this week, with the yield on the 2031 notes rising by the most in almost two years, on speculation quickening economic growth will stoke inflation. The peso was little changed for the week.
Gross domestic product rose 7.8 percent in the first quarter, the most in Asia, while consumer-price gains held at 2.6 percent in May, official data show. The U.S. central bank will reduce its bond-buying program to $65 billion a month at the Oct. 29-30 meeting of the Federal Open Market Committee, from the current level of $85 billion, according to the median estimate in a Bloomberg survey of 59 economists this week.
The yield on the 8 percent notes due July 2031 rose 45 basis points, or 0.45 percentage point, this week and 18 basis points today to 4.63 percent as of 4:28 p.m. in Manila, according to prices from Tradition Financial Services. That was the biggest advance since the securities were sold in July 2011 and the highest level since March 4.
“The high GDP growth rate and expectations of this being sustained may put pressure on inflation moving forward,” said Bunny Bernardo-Recto, vice president at Chinatrust Philippines Commercial Bank Corp. in Manila. “Risky assets were sold off globally in reaction to the possibility that the Fed will taper its bond buying.”
The Philippines’ good fundamentals are intact and the nation may be closer to winning an investment-grade rating from Moody’s Investors Service, Bangko Sentral ng Pilipinas Governor Amando Tetangco said this week.
The peso was steady this week at 42.26 per dollar, according to Tullett Prebon Plc. It fell 0.3 percent today after strengthening as much as 0.4 percent earlier. The nation’s foreign-exchange reserves dropped to a seven-month low of $82.9 billion in May, the central bank reported today.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell nine basis points to 6.53 percent today.
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