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Philippine Bonds Gain as Tetangco Sees Easing Room; Peso Rises

Philippine bonds advanced after Governor Amando Tetangco said the central bank has room to ease monetary policy further should global economic conditions deteriorate. The peso strengthened.

Bangko Sentral ng Pilipinas will adjust policy “as appropriate,” Tetangco said in a text message yesterday, after the bank held its benchmark interest rate at a record-low 3.75 percent this month following three cuts in 2012. The amount of debt sold at the government’s regular weekly auctions will probably be less in the three months through December than in the current quarter, due to a retail bond sale of at least 60 billion pesos ($1.4 billion) next month, Deputy Treasurer Eduardo Mendiola said today.

“There is still some room for further cuts,” said Jonathan Ravelas, chief market strategist in Manila at BDO Unibank Inc. “We’re facing a global slowdown and we need to ensure that that growth will be sustained.”

The yield on the 4.75 percent bonds due September 2022 fell three basis points, or 0.03 percentage point, to 4.70 percent as of 4:41 p.m. in Manila, according to Tradition Financial Services. The government sold 9 billion pesos of 20-year notes at a yield of 5.75 percent today.

Standard & Poor’s raised its 2012 growth outlook for the Philippines yesterday to 4.9 percent from 4.3 percent, while cutting forecasts for China, India, Singapore and South Korea. The $225-billion Philippine economy grew by an average 6.1 percent per quarter in the first half of the year, heading for its fastest annual expansion since 2010.

Policy makers remain “very watchful” of exchange-rate swings as excessive volatility and prolonged movements in the same direction pose concerns, Tetangco said in a Sept. 23 e-mail.

The peso climbed 0.1 percent to 41.735 per dollar in Manila, data from Tullett Prebon Plc showed. The currency gained 5.1 percent in 2012, the most in Asia after the Singapore dollar, and touched a four-year high of 41.358 per dollar on Sept. 17. One-month implied volatility, which measures exchange-rate swings used to price options, rose 25 basis points to 5.25 percent.

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