Philippine 20-Year Bonds Fall After Five-Week Rally; Peso Drops

Philippine 20-year bonds fell, following a run of five weekly gains, amid speculation some investors are taking profits on their holdings before month-end. The peso weakened.

The yield on sovereign notes due March 2032 dropped 29 basis points in July as data showed inflation slowed for a third month to 2.8 percent in June. The central bank lowered its overnight borrowing rate for the third time this year on July 26, cutting it to a record-low 3.75 percent from 4 percent.

“We’re expecting local bond yields to trade with an upward bias of five to seven points for the week,” said Jill Singian, a portfolio manager at Bank of the Philippine Islands (BPI) in Manila . “Yields have trended lower in the past weeks so dealers would like to lock in some gains. It doesn’t change the fundamental outlook or positive sentiment.”

The yield on the Philippines’ 5.875 percent bonds due March 2032 increased six basis points, or 0.06 percentage point, to 5.625 percent as of 4:04 p.m. in Manila, according to prices from Tradition Financial Services. The rate reached 5.565 percent on July 27, the lowest since the notes were issued in March this year.

The peso closed at 41.93 per dollar in Manila, compared with 41.91 at the end of last week, according to Tullett Prebon Plc. The currency has strengthened 0.3 percent this month.

Inflation will settle within the lower half of the central bank’s 3 percent to 5 percent target range in 2012 and 2013, Governor Amando Tetangco said last week.

Philippine bonds have returned 15 percent in the past year, a performance second only to Indonesia in Asia’s 10 biggest economies excluding Japan, HSBC Holdings Plc local-currency bond indexes show.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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