Philippine Bonds Advance Before Budget, GDP Data; Peso Gains

Philippine bonds headed for a weekly gain on speculation a government report next week will show economic growth last quarter was the least in 2012, prompting speculation of more interest-rate cuts. The peso rose.

Expansion in the $225 billion economy probably eased to 5.4 percent last quarter, from 5.9 percent in the previous three months, according to the median estimate of 21 economists surveyed by Bloomberg News before a report due Nov. 28. Government spending accelerated in October, Budget Secretary Butch Abad said this week.

“The budget and gross domestic product data coming out are expected to be bond friendly,” said Jill Singian, a bond portfolio manager at Bank of the Philippine Islands in Manila. “Weaker growth means there may be more room for accommodation by the central bank. People are also expecting government revenue to show strength.”

The yield on the 6.125 percent bonds due October 2037 fell 10 basis points, or 0.1 percentage point, this week to 5.78 percent as of 11:19 a.m. in Manila, according to Tradition Financial Services. The rate was little changed today.

The Senate approved a bill this week to increase excise taxes on tobacco and liquor, a measure that Finance Secretary Cesar Purisima said may add an estimated 40 billion pesos ($974 million) to government coffers in the first year of implementation.

Bangko Sentral ng Pilipinas cut its benchmark interest rate a fourth time this year to a record-low 3.5 percent in October. Policy makers next meet to decide on borrowing costs Dec. 13.

The peso gained 0.7 percent this week to 41.07 per dollar in Manila, data from Tullett Prebon Plc showed. It was little changed today.

One-month implied volatility, which measures expected moves in exchange-rates used to price options, dropped 10 basis points this week to 4.6 percent.

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