Philippine 7-Year Bonds Fall as Investors Prepare for Debt Swap

Philippine seven-year bonds fell, halting a two-day gain, on speculation some funds were selling the notes to purchase securities eligible for this week’s government debt exchange.

“Investors could be tweaking their portfolios to give room for the longer-duration bonds offered in the swap,” said Bunny Bernardo-Recto, vice president for treasury at Chinatrust (Phils.) Commercial Bank in Manila. The 25-year coupon is “very attractive,” she said.

The government is offering new notes due in 2020 and 2035 with minimum coupon rates of 5.875 percent and 8.125 percent, and will issue at least 30 billion pesos ($685 million) of the securities in the exchange and buyback program that ends Dec. 10, the Bureau of the Treasury said last week.

The yield on the 5.375 percent securities due in October 2017 rose five basis points to 5.07 percent as of 5:55 p.m. in Manila, according to Tradition Financial Services.

The peso closed 0.3 percent higher at 43.77 per dollar after climbing 0.8 percent in the week to Dec. 3, according to inter-dealer broker Tullett Prebon Plc.

Philippine inflation likely cooled in November, the government may report tomorrow. Consumer prices rose 2.5 percent from a year earlier, according to the median estimate of 16 economists in a Bloomberg News survey. Prices climbed 2.8 percent in October, the least in 11 months.

The central bank isn’t “unduly concerned” about asset price bubbles, Assistant Governor Cyd Amador said in an e-mail reply to questions today.

Overseas remittances will likely increase in 2011 as more Filipinos find employment overseas, Labor Secretary Rosalinda Baldoz said today in Manila. Cash transfers rose 7.8 percent to $13.8 billion in the first nine months of the year, the central bank reported last month. October data will be released Dec. 15.

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