Philippine 20-Year Bond Yield Drops to 1-Year Low After SDA Cut

Philippine 20-year bonds gained, pushing the yield to a one-year low, as the central bank cut the interest rate on its special-deposit accounts for a second time this year. The peso weakened

Bangko Sentral ng Pilipinas reduced the rate on the accounts to 2.5 percent from 3 percent today and set the rate on all tenors for its reverse-repurchase facility at 3.5 percent, the same as the overnight borrowing rate, Governor Amando Tetangco said in a briefing. The two SDA cuts this year will result in 20 billion pesos ($493 million) of annual savings for the monetary authority, Assistant Governor Cyd Amador said.

“Bids continue to flock to the long-end of the curve to lock-in spreads after the SDA rate cut,” said Bunny Bernardo- Recto, vice president at Chinatrust Philippines Commercial Bank Corp. in Manila.

The yield on the 5.875 percent bonds due March 2032 fell three basis points, or 0.03 percentage point, to 4.48 percent after the decision, according to Tradition Financial Services. That’s the lowest since the notes were first sold a year ago.

The peso closed 0.1 percent lower at 40.625 per dollar before the policy announcement, according to Tullett Prebon Plc. It’s the best-performing emerging-market currency in the past 12 months, appreciating 5.6 percent. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 11 basis points to 3.62 percent.

BSP will continue to review all tools and will take into account the rising level of liquidity, Assistant Governor Amador said at the briefing today. The monetary authority has raised its inflation forecast for 2013 to 3.3 percent from 3 percent, she said.

The savings from the first SDA rate cut will allow BSP “to participate a little bit more” in the foreign-currency market, Monetary Board Member Felipe Medalla said yesterday.

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

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