Philippine 10-year bonds fell the most in almost three weeks as unexpectedly strong economic growth in the third quarter stoked speculation the central bank won’t need to cut borrowing costs further. The peso declined.
Gross domestic product rose 7.1 percent from a year earlier, the most in two years and more than the 5.4 percent median estimate of economists surveyed by Bloomberg, official data showed today. The central bank reduced its benchmark interest rate last month for the fourth time this year to 3.5 percent to spur growth and damp currency gains. The next review is Dec. 13.
“The general market has a view that it appears the economy can stand on its own and may not need further rate cuts,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “So bond yields are correcting.”
The yield on the 12.75 percent government notes due October 2022 climbed nine basis points, or 0.09 percentage point, to 5.10 percent, according to noon fixing prices from the Philippine Dealing & Exchange Corp.
The peso fell 0.1 percent to 40.90 per dollar, according to Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined 10 basis points to 4.40 percent. The peso reached the strongest level since March 2008 yesterday and has climbed 7.2 percent this year, the best performance among Asia’s 11 most-traded currencies.
The peso’s 14-day relative-strength index was just shy of the 30 level yesterday that indicated the dollar may gain. The central bank remains watchful of the market as the currency has appreciated faster than its peers, Governor Amando Tetangco said yesterday.
BDO Unibank’s Ravelas said he wouldn’t discount another interest-rate cut in December should the peso keep outperforming other Asian currencies.