Philippine Bonds Rise as Easing Inflation Supports Low Rates

Philippine bonds rose, pulling down the yield on 2031 notes from a three-week high, on speculation slowing inflation will give the central bank room to keep interest rates at a record low. The peso rose.

Policy makers in East Asia’s emerging economies should hold borrowing costs steady as economic growth is poised to accelerate next year without spurring price gains, the World Bank said in a report today. Bangko Sentral ng Pilipinas is preparing to deploy tools to make sure currency movements don’t create pressure on financial stability, Governor Amando Tetangco said today.

“The inflation outlook will remain tame,” said Antonio Espedido, treasurer at China Banking Corp. in Manila. “The market is on the lookout for whether the global economy will pick up, because if it doesn’t it could eventually hurt our own growth. People are going to be cautious into the new year.”

The yield on the 8 percent bonds due July 2031 fell one basis point, or 0.01 percentage point, to 5.59 percent in Manila, according to Tradition Financial Services.

The peso rose 0.1 percent to 41.038 per dollar in Manila, data from Tullett Prebon Plc showed. It has advanced 6.8 percent this year, the second-best performance in Asia after the South Korean won. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 20 basis points to 4.4 percent.

Growth Outlook

Bangko Sentral will continue to allow some appreciation of the peso, Tetangco said after the balance of payments surplus was reported at $2.16 billion for November. The excess reflects investors’ positive views on strong growth prospects and remittances and helps support the currency, the governor said.

Policy makers kept the benchmark interest rate at 3.5 percent last week and lowered inflation forecasts for 2012 through 2014. Consumer prices in the Philippines rose 2.8 percent in November from a year earlier, the least since June.

Global food costs may ease inflationary pressures in some economies in developing Asia, the Asian Development Bank reported on Dec. 7.

Emerging Asian economies will expand 6 percent this year and 6.6 percent in 2013, the Manila-based ADB said in its Asian Development Outlook 2012 Supplement as it lowered forecasts by 0.1 percentage point for each period. Among the region’s economies, it only raised its projections for Southeast Asia, predicting growth of 5.3 percent in 2012 compared with 5.2 percent earlier.

The government expects robust economic growth in the first half of next year helped by election spending, Budget Secretary Butch Abad said today as President Benigno Aquino signed the 2013 budget of 2.01 trillion pesos ($49 billion).

To contact the reporter on this story: Karl Lester M. Yap in Manila at

To contact the editor responsible for this story: James Regan at

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