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Philippine 24-Year Bond Yield Drops to Record Low on SDA Flows

Feb. 14 (Bloomberg) -- Philippine 24-year bonds advanced for a sixth day, pushing the yield to a record low, as investors continued to shift funds to sovereign debt from central bank accounts. The peso strengthened, touching a one-month high.

The yield on the notes due 2037 has fallen 63 basis points since Jan. 23, the day before the central bank cut the interest rate on almost 1.7 trillion pesos ($42 billion) in its special-deposit accounts. Bangko Sentral ng Pilipinas is preparing its next phase of foreign-exchange liberalization as it studies measures that will encourage outward dollar flows, Deputy Governor Diwa Guinigundo said yesterday.

“Maturing placements in special-deposit accounts are being shifted to government bonds,” said Antonio Espedido, treasurer at China Banking Corp. in Manila. “There’s a lot of liquidity after the moves of the central bank with respect to the SDAs.”

The yield on the 6.125 percent government securities due October 2037 fell two basis points, or 0.02 percentage point, to 4.91 percent as of 12:06 p.m. in Manila, according to prices from Tradition Financial Services. That was the lowest level since they were first sold in October.

The peso gained 0.1 percent to 40.628 per dollar, data from Tullett Prebon Plc show. It touched 40.550 earlier, the strongest level since Jan. 14. One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped five basis points to 4.2 percent.

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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