Philippine Peso Climbs on Europe Debt Plan Hopes; Bonds Advance

The Philippine peso rose from a one-week low on speculation the prospect of sovereign-rating downgrades will galvanize European leaders to resolve the region’s debt crisis. Government bonds advanced.

German Finance Minister Wolfgang Schaeuble said yesterday European leaders will ratchet up efforts to end their two-year old crisis at a Dec. 8-9 summit. Philippine President Benigno Aquino said yesterday the government will boost spending next year and the central bank may cut interest rates to support economic growth amid a slump in exports.

“The market is hoping they will come up with some concrete plans to resolve the Europe debt crisis,” said Catherine Bautista, a senior trader of sovereign bonds in Manila at Union Bank of the Philippines. “It may be too soon to expect a resolution this year given the complexity of the problem.”

The peso gained 0.4 percent to 43.278 per dollar at the close in Manila, according to Tullett Prebon Plc. The currency reached 43.460 yesterday, the weakest since Nov. 29.

S&P put 15 euro-area nations, including Germany and France, on review for possible downgrade this week and said yesterday a European Union bailout fund may lose its top credit rating if any of the six guarantors lose their AAA grade.

The Philippine government has curbed spending this year to win a ratings upgrade, narrowing its budget deficit to 74.3 billion pesos ($1.7 billion) in the first 10 months of the year from 270 billion pesos a year earlier. Exports fell 27 percent in September, the worst performance since April 2009.

Bonds rose for a second day after central bank Governor Amando Tetangco said yesterday policy makers are “open to possible easing” in early 2012 as economic growth and inflation decelerate. Consumer prices climbed 4.8 percent in November from a year earlier, versus 5.2 percent in October, the government said yesterday.

The yield on the government’s 5.875 percent notes maturing in January 2018 dropped four basis points, or 0.04 percentage point, to 4.86 percent, according to Tradition Financial Services. That’s the lowest closing level since Sept. 13.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE