Philippine Peso, Bonds Gain on Interest-Rate Cut Speculation

The Philippine peso and government bonds completed weekly gains on speculation the central bank will cut interest rates next week.

The currency advanced today by the most in more than a month after European Central Bank President Mario Draghi said his strategy for tackling Europe’s crisis is beginning to work. Philippine central bank Governor Amando Tetangco said Jan. 9 that monetary policy will probably be eased this quarter as inflation cools. The policy rate will be reviewed on Jan. 19, with nine of 11 economists surveyed by Bloomberg forecasting a 25-basis point cut to 4.25 percent. Two expect no change.

“The central bank meeting is coming up and it will be a surprise if they don’t cut,” said Radhika Rao, an economist at Forecast Pte in Singapore. “The rate-cut outlook is helping fuel a rally in stocks and contributing to overall optimism.”

The peso gained 0.9 percent this week to 43.725 per dollar as of the close in Manila, according to Tullett Prebon Plc. It strengthened 0.7 percent today, its biggest daily advance since Dec. 1. The benchmark stockindex has risen 2.9 percent this week and touched a record high today before closing lower.

Bangko Sentral ng Pilipinas kept its benchmark interest rate unchanged for a fifth meeting in December after two increases earlier in the year. It raised the reserve-requirement ratio for lenders twice last year to 21 percent. Consumer prices rose 4.2 percent in December from a year earlier, the least in 11 months, official data show.

Growth (PGDYTY) in the $200 billion economy may have exceeded 4 percent last year, Economic Planning Secretary Cayetano Paderanga said today in Manila. The government will report the data on Jan. 30.

The nation may achieve a higher credit rating in the next two to three months after Standard & Poor’s Ratings Services raised the outlook on the debt in December, Budget Secretary Butch Abad told reporters today in Manila.

The yield on the 5.875 percent January 2018 peso bond fell 10 basis points, or 0.10 percentage point, this week to 4.65 percent, according to Tradition Financial Services. The rate dropped three basis points today.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net.

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