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Philippine Bonds Advance as Central Bank Forecast to Hold Rate

Philippine government bonds advanced on speculation the central bank will hold its benchmark interest rate at a record low at a meeting tomorrow, supporting demand for the nation’s debt. The peso declined.

Bangko Sentral ng Pilipinas will keep its overnight borrowing rate at 3.5 percent, all 20 economists forecast in a Bloomberg News survey. Policy makers cut the rate four times last year. The Bureau of the Treasury sold 25 billion pesos ($615 million) of notes due November 2019 yesterday at an average yield of 3.876 percent, with investors submitting almost 80 billion pesos in bids.

“The governor has been very vocal in saying rates are appropriate where they are,” said Jan Briace Santos, a debt trader who helps manage the equivalent of $17 billion at BPI Asset Management Inc. in Manila. “People are buying longer tenors. It’s a sign there is good demand for local debt mainly due to positive fundamentals of the Philippines.”

The yield on the 8.125 percent bonds due December 2035 fell two basis points, or 0.02 percentage point, to 5.54 percent as of 5:22 p.m. in Manila, according to Tradition Financial Services.

Low interest rates are fueling financial asset prices in the Philippines and capital inflows could extend gains in such prices, the International Monetary Fund said today.

The peso fell 0.1 percent to 40.62 per dollar, data from Tullett Prebon Plc show. The currency has risen 6.5 percent in the past 12 months, the best performer among Asia’s 11 most- traded currencies. One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged for a seventh day at 4 percent.

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: James Regan at jregan19@bloomberg.net

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