Philippine Bonds Rise on Failed Treasury Auction; Peso Steady

Philippine bonds gained after the government rejected all bids at an auction of seven-year bonds yesterday to prevent yields rising. The peso was little changed.

The coupon on the new seven-year debt would have risen to 5.25 percent had the Bureau of the Treasury accepted the bids for the 9 billion pesos ($210 million) of debt on offer, auction results showed. The Treasury sold seven-year bonds at an average yield of 4.504 percent in February. Inflation remains manageable and is expected to stay within target this year, Bangko Sentral ng Pilipinas Governor Amando Tetangco said today.

“The Treasury’s intent to cut down the supply of debt and manage yields was exemplified by the rejection of all bids yesterday,” said Jan Briace Santos, a fixed-income trader who helps manage the equivalent of $16 billion at BPI Asset Management Inc. in Manila. “That was a positive signal that they’ve got enough funds for now.”

The yield on the 5.875 percent bonds due March 2032 fell three basis points, or 0.03 percentage point, to 5.95 percent as of 5:13 p.m. in Manila, according to Tradition Financial Services. The peso closed little changed at 42.93 per dollar, prices from Tullett Prebon Plc showed. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 15 basis points to 5.90 percent.

The Philippines will probably reduce the amount of securities it offers at weekly auctions in the three months starting April after raising a record amount from debt sold to individuals last month, Treasurer Roberto Tan said March 26.

The government auctioned 9 billion pesos each week in the first quarter as it sought to raise 117 billion pesos to finance its budget deficit. The Southeast Asian nation sold a record 179.8 billion pesos of 15- and 20-year retail bonds in February. The Bureau of the Treasury will announce its second-quarter borrowing plan this week.

Consumer prices in the Philippines, which imports most of its energy needs, rose 2.7 percent from a year earlier in February, the smallest increase since September 2009.

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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