Philippine Bonds Gain on Predictions Rates to Stay at Record Low

Philippine bonds rose on speculation prices in the economy will remain stable, allowing the central bank to hold interest rates at a record low.

Bangko Sentral ng Pilipinas will keep its overnight borrowing rate at 4 percent at a meeting tomorrow, according to all 17 economists surveyed by Bloomberg. The monetary authority cut rates at the previous two sessions. Manageable inflation is a priority of President Benigno Aquino, presidential spokesman Edwin Lacierda said yesterday after a survey showed consumer prices were one of the biggest concerns among Filipinos.

“The central bank can probably afford to stay at the current level for a longer time given the outlook for stable inflation,” said Speedy Delfino, a trader at East West Banking Corp. in Manila.

The yield on 5 percent government bonds due August 2018 fell 10 basis points, or 0.10 percentage point, to 4.90 percent, the first decline in six days, as of 4 p.m. in Manila, according to prices from Tradition Financial Services.

The Bureau of the Treasury sold six-month and one-year bills for the first time in a month on April 16, “an indication that short-term secondary-market rates are normalizing,” according to Delfino.

Inflation will be within the 3 percent to 5 percent target this year, central bank Governor Amando Tetangco told reporters today. Bangko Sentral will gauge the impact of previous rate reductions and assess the outlook on consumer prices tomorrow, he said. Gains in consumer prices unexpectedly slowed to a 30-month low of 2.6 percent in March, official data show.

The peso closed little changed at 42.655 per dollar, compared with 42.650 yesterday, according to Tullett Prebon Plc. It earlier touched 42.560, the strongest level since April 3.

One-month implied volatility for the currency, which measures exchange-rate swings used to price options, dropped 30 basis points to 5.40 percent, the lowest level since 2007.

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