Philippine Peso Halts 3-Day Loss After Aquino Speech; Bonds Fall

The Philippine peso halted three days of losses on speculation investors may increase holdings of the nation’s assets after President Benigno Aquino urged Congress to pass revenue-boosting measures. Bonds declined.

Aquino in his state-of-the-nation address in Manila yesterday also touted Morgan Stanley’s $1 billion investment in local financial markets among the successes during his first two years in office. Gains in the peso were limited after Moody’s Investors Service cut credit-rating outlooks for Germany, the Netherlands and Luxembourg to negative.

“There could be some spillover effects from the state-of-the-nation” address, said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “But the risk lies for the peso to weaken. Asian currencies are going to slide due to the overall risk sentiment.”

The peso closed at 42.045 per dollar in Manila, compared with 42.058 yesterday, according to Tullett Prebon Plc. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 25 basis points, or 0.25 percentage point, to 6 percent. The peso has risen 4.2 percent this year, the best performance among Asia’s 11 most-active currencies.

Foreign funds bought $530 million more local stocks than they sold so far this month, bringing net purchases this year to $2.2 billion, according to exchange data.

Aquino urged lawmakers in his address to help bolster the government’s share of resource contracts and raise excise taxes on tobacco and alcohol, while pledging to improve infrastructure to attract investment and create jobs.

The yield on the government’s 5.875 percent bonds due March 2032 climbed four basis points to 5.64 percent, according to prices from Tradition Financial Services.

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