Philippine Bonds Rise on Yields, Inflation Outlook; Peso Drops

Philippine bonds rose as slowing inflation and yields near a 10-week high attracted investors. The peso fell for a fourth day.

The outlook for consumer prices, which rose 2.7 percent last month in the smallest gain since 2009, remains manageable and allows the central bank to support economic growth, Governor Amando Tetangco said last week. The Federal Reserve’s decision to refrain from new action to lower borrowing costs in the U.S. gives the Philippines scope to assess the impact of previous policies, Tetangco said in a mobile phone message today.

“The medium-term outlook for inflation is still manageable,” said Jill Singian, senior manager for treasury at the Bank of the Philippine Islands (BPI) in Manila. “The recent rise in yields is a good opportunity to pick up and position, especially at the long-end.”

The yield on the 7.375 percent March 2021 peso bonds fell five basis points, or 0.05 percentage point, to 5.20 percent, according to prices from Tradition Financial Services at 2:08 p.m. local time. The rate climbed to 5.25 percent yesterday, the highest level since Jan. 2. The peso dropped 0.5 percent to 42.88 per dollar, data from Tullett Prebon Plc showed.

Bangko Sentral ng Pilipinas cut the overnight borrowing rate by a total 50 basis points this year to 4 percent, the lowest level in a year. The policy stance will support economic growth as inflation is expected to average below 4 percent this year, well within the central bank’s target of between 3 percent and 5 percent, the governor said on March 6.

The monetary authority may pause after this year’s two rate cuts, Tetangco said in a March 10 e-mail reply to questions. The next policy meeting will be on April 19.

Policy makers are “watchful of volatilities” in oil costs and other prices and are monitoring any “possible second-round effects to see if there is a need to modify our current stance of policy,” Tetangco said today.

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