Philippine Peso, Bonds Drop as Funds Sell Emerging-Market Assets

The Philippine peso slumped to a four-month low and bonds fell as the risk of a Greek exit from the euro prompted funds to dump emerging-market assets.

European leaders meeting in Brussels clashed over joint debt sales as they called on Greece to stick with the budget cuts needed to stay in the euro. Brazil auctioned currency swap contracts yesterday and Mexico sold dollars for the first time since 2009, joining emerging markets like India in propping up exchange rates.

“The uncertainty in Europe has a very high likelihood of persisting until June,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila. “Investors are reallocating their assets to safer outlets. No matter how strong our economic fundamentals are, we should not be surprised if we see a regionwide decline in currencies and equity markets.”

The peso slid 0.7 percent to 43.74 per dollar as of 3:58 p.m. in Manila, the lowest since Jan. 16, prices from Tullett Prebon Plc show. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 25 basis points to 6.75 percent.

The yield on 5.75 percent government bonds due November 2021 rose three basis points, or 0.03 percentage point, to 5.55 percent, according to Tradition Financial Services.

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