Philippine Peso Completes Weekly Gain on Stimulus; Bonds Drop

The Philippine peso completed second week of gains after the government announced plans to boost spending and offered to buy back up to $1.5 billion of debt.

President Benigno Aquino unveiled a 72.1 billion peso ($1.7 billion) economic stimulus on Oct. 12, a day after the statistics office reported that exports slumped in August by the most since September 2009. The government this week offered to buy as much as $1.5 billion of foreign-currency debt as part of managing its liabilities.

“The government has pledged to boost spending, inflation is stable and fiscal and debt consolidation is supportive of positive sentiment on the peso on the medium-term,” said Radhika Rao, an economist at Forecast Pte in Singapore.

The peso rose 0.4 percent this week to 43.355 per dollar at the close in Manila, according to Bankers Association of the Philippines. The currency was little changed today and reached 43.13 yesterday, the strongest level since Sept. 14.

Bangko Sentral ng Pilipinas will probably keep its benchmark interest rate at 4.5 percent at its policy meeting on Oct. 20, according to all 13 economists in a Bloomberg News survey. It maintained the rate at the past three meetings.

Government bonds fell today. The yield on the 5.875 percent notes maturing in January 2018 rose seven basis points, or 0.07 percentage point, to 5.20 percent, according to Tradition Financial Services. It climbed 10 basis points this week.

The nation has so far sold about 55 billion pesos of 10-and 15-year bonds to individual investors before the sale closes on Oct. 17, First Metro Investment Corp. President Roberto Juanchito Dispo said today. The government sold more than 100 billion pesos of retail bonds in March.

“Market sentiment was affected after the sale of retail treasury bonds because the coupons were not so attractive,” said Larry Gutierrez, a fixed-income trader at Philippine Bank of Communications in Manila.