Philippine Peso Touches One-Week High, Bonds Gain on Debt Rating

The Philippine peso touched a one- week high and government bonds rose on speculation the nation’s first investment-grade rating will spur capital inflows.

Fitch Ratings upgraded the Philippines to BBB- on March 27, the last day of trading before markets closed for the Easter break. Currency gains were limited after central bank Governor Amando Tetangco said March 28 policy makers will probably unveil this quarter new measures giving local investors easier access to foreign currencies to help offset increased global demand for the nation’s assets. Overseas funds may also be banned from using the bank’s reverse repurchase facility, he said.

The peso traded at 40.805 per dollar as of 10:22 a.m. in Manila, from a previous close of 40.823, according to prices from Tullett Prebon Plc. It reached 40.73, the strongest level since March 22. The currency strengthened 0.6 percent in the first three months of 2013 and the Philippine Stock Exchange Composite Index jumped 18 percent as overseas investors bought $1 billion more Philippine shares than they sold.

“We expect inflows into debt and equities to continue over time from funds with mandates to invest in investment-grade markets,” said Patrick Ella, an economist in Manila at Security Bank Corp. “The central bank has been successful in curbing the peso rally by limiting foreign participation.”

Bangko Sentral ng Pilipinas has capped lenders’ currency forward positions, banned overseas funds from special deposit accounts and trimmed the interest rate on those accounts twice this year, among measures to temper the currency rally.

One-month implied volatility for the peso, a measure of expected exchange-rate moves used to price options, rose three basis points or 0.03 percentage point, today to 3.80 percent, data compiled by Bloomberg show.

The yield on the government’s 6.125 percent bonds due October 2037 fell 12 basis points to 3.74 percent, according to prices from Tradition Financial Services. The yield tumbled 109 basis points in March, the most since the notes were sold in October.

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