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Philippine Bonds Climb Ahead of Interest-Rate Review; Peso Gains

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Feb. 29 (Bloomberg) -- Philippine three-year bonds rose for a second day as economists predicted policy makers will cut borrowing costs at a review tomorrow. The peso advanced.

The central bank will reduce the rate it pays lenders for overnight deposits by a quarter of a percentage point to 4 percent, according to 14 of 18 economists surveyed by Bloomberg. The monetary authority has “room for further calibrated accommodation” in its benchmark interest rates, Governor Amando Tetangco said in an e-mail late yesterday.

“Philippine bonds could probably rally if they make a decisive rate cut,” said Enrico Tanuwidjaja, a Singapore-based senior currency analyst at Malayan Banking Bhd. “We think they will cut. The market will want to know if there is room for further cuts.”

The yield on the government’s 12.375 percent notes due February 2015 fell 13 basis points, or 0.13 percentage point, to 3.83 percent in Manila, the lowest level since Jan. 5, according to noon fixing prices from Philippine Dealing & Exchange Corp. It dropped 21 basis points in February.

The peso appreciated 0.2 percent to 42.747 per dollar in Manila, according to Tullett Prebon Plc. The currency gained 0.3 percent this month.

Consumer-price increases slowed to a 13-month low of 3.9 percent in January, according to government data. Inflation probably eased to between 2.7 percent and 3.6 percent in February, Tetangco said yesterday. Price pressures should “continue to be manageable, barring oil-supply surprises due to any acceleration in the tensions in the Middle East,” he said.

To contact the reporter on this story: 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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