Philippine Bonds Advance on Slower Inflation; Peso Declines

Philippine seven-year bonds rose, snapping a two-day loss, as the government reported the slowest inflation since September 2009.

Consumer prices advanced 2.7 percent in February from a year earlier, compared with the 3.2 percent median estimate in a Bloomberg survey, official data showed today. The outlook for inflation remains manageable, allowing the central bank to be supportive of economic growth, Governor Amando Tetangco said in a speech in Manila today. The monetary authority is targeting consumer-price gains of 3 percent to 5 percent this year.

“Inflation is below the lower end of the target,” said Joey Cuyegkeng, an economist at ING Groep NV in Manila. “It provides the central bank leeway on monetary policy. The likelihood of a rate cut increases.”

The yield on the government’s 7.875 percent bonds due February 2019 dropped eight basis points, or 0.08 percentage point, to 4.77 percent, according to noon fixing prices from the Philippine Dealing & Exchange Corp. The peso fell 0.2 percent to 42.963 per dollar at the close in Manila, according to Tullett Prebon Plc.

Bangko Sentral ng Pilipinas cut interest rates for a second time this year on March 1 to shore up growth. Policy makers reduced the rate on overnight deposits by 25 basis points to 4 percent.

The Philippine economy will accelerate this year as looser monetary policy fosters growth and government spending gives “welcome support,” the International Monetary Fund said in an annual report released today. The IMF forecast that gross domestic product will increase by 4.2 percent this year, after climbing 3.7 percent in 2011, and that inflation should stay within the central bank’s targeted range.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

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

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