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Philippine 10-Year Bonds Rally to Record on Rate-Cut Speculation

Feb. 9 (Bloomberg) -- Philippine 10-year bonds rose, pushing yields to a record low, on speculation slowing money-supply growth supports the case for another interest-rate cut. The peso touched a six-month high.

Money-supply increased 6.3 percent in December from a year earlier, the least since July 2008, data showed yesterday. Inflation eased to a 13-month low of 3.9 percent in January, affirming that the central bank has “policy space should the need to support growth persist,” Governor Amando Tetangco said on Feb. 7. The nation deserves an investment-grade debt rating, President Benigno Aquino’s spokesman Ricky Carandang said yesterday.

“The latest money-supply data supports speculation for another rate cut,” said Speedy Delfino, a fixed-income trader at East West Banking Corp. in Manila. “The government knows it has to achieve faster-than-average growth to win rating upgrades.”

The yield on the benchmark 10-year peso bonds fell six basis points, or 0.06 percentage point, to 5.08 percent, according to midday fixing prices at Philippine Dealing & Exchange Corp. That’s the lowest level since October 1998 when Bloomberg began collecting the data.

The peso closed little changed at 42.205 per dollar, from 42.220 yesterday, according to Tullett Prebon Plc. The currency touched 42.090, the strongest level since Aug. 2, 2011.

Bangko Sentral ng Pilipinas cut its overnight borrowing rate to 4.25 percent from 4.5 percent on Jan. 19, the first reduction in more than two years. The next policy meeting will be on March 1. Gross domestic product increased 3.7 percent in 2011, a two-year low, compared with a revised 7.6 percent gain a year earlier, official data showed Jan. 30.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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