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Philippine Rate Swaps Climb Most Since May 2011 on Jobless Data

Dec. 18 (Bloomberg) -- Philippine one-year interest-rate swaps climbed the most since May 2011 as traders pared bets for a cut in borrowing costs after data showed the unemployment rate dropped the least in more than a year.

The jobless rate was 6.8 percent in October, compared with 7 percent in July, the National Statistics Office reported today. The 0.2 percentage point decline was the smallest since July 2011. The figures are released every three months. Bangko Sentral ng Pilipinas held its benchmark rate at a record low of 3.5 percent last week after cutting it 100 basis points this year to support growth. Inflation cooled to 2.8 percent in November, the least in five months.

“The low unemployment rate limits their ability to cut interest rates,” said Rees Kam, a strategist at SJS Markets Ltd., a Hong Kong-based financial services company that specializes in fixed-income securities. “That’s why interest-rate swaps are higher.”

The one-year swap rose 40 basis points, or 0.4 percentage point, to 1.025 percent, according to data compiled by Bloomberg. The contract fell in each of the last five months as investors boosted bets for lower borrowing costs. The five-year rate increased 20 basis points to 1.575 percent.

The Philippine economy grew 7.1 percent in third quarter from a year earlier, the fastest pace in Southeast Asia. The peso strengthened 6.7 percent this year, the second-best performing currency among the 11-most active currencies in Asia.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Yanping Li in Singapore at yli16@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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