Philippine Peso Falls as Greece Debt Deal Threatened; Bonds Drop

The Philippine peso slid the most in five weeks on concern a Greek referendum on Europe’s aid plan could result in a default, prompting investors to sell emerging- market assets.

The MSCI Asia Pacific Index of regional stocks dropped for a third day after Greek Prime Minister George Papandreou announced his desire to put the rescue pact to a national vote. Higher capital charges on non-deliverable currency forwards may help curb gains in the peso, central bank Governor Amando Tetangco said yesterday.

“Europe’s debt crisis continues to influence currencies worldwide because people are worried about the success of the rescue plan,” said Rafael Algarra, executive vice president at Security Bank Corp. in Manila. “We will remain volatile as the news comes out from Europe.”

The peso dropped 0.6 percent to 42.89 per dollar as of 10:00 a.m. in Manila, its biggest loss since Sept. 26, according to Tullett Prebon Plc. Financial markets were shut in the Philippines on Oct. 31 and Nov. 1 for holidays.

Bangko Sentral ng Pilipinas will increase the risk-weight charge on NDFs with a “net-open position” to the equivalent of a capital adequacy ratio of 15 percent from 10 percent, effective 2012, it said in a statement last week.

The yield on the government’s 5.875 percent bonds due January 2018 surged 16 basis points, or 0.16 percentage point, to 5.1 percent, according to Tradition Financial Services. The government will auction 9 billion pesos ($210 million) of Treasury bills today.

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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