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Philippine Bond Yield Declines on Probable Special Deposit Curbs

The yield on Philippine government bonds due 2019 approached a record low after central bank Governor Amando Tetangco said authorities were considering more measures to discourage investment in special-deposit accounts.

The yield on the notes has fallen 33 basis points since Jan. 23, the day before Bangko Sentral ng Pilipinas reduced the interest rate on SDAs to 3 percent from more than 3.5 percent to curb currency speculation. Policy makers will seek to rationalize access to these accounts to keep them as a liquidity management tool and not as an investment outlet, Tetangco said in a speech in Manila on Feb. 15.

“There are expected revisions on the SDAs, which could mean lower rates for retail as well as institutional investors,” said Lito Mercado, head of trading at Rizal Commercial Banking Corp. in Manila. That “will prompt them to look at higher-yielding assets, including long-term Philippine bonds,” he said.

The yield on the government’s 3.875 percent bonds due November 2019 fell two basis points, or 0.02 percentage point, to 3.56 percent as of 4:04 p.m. in Manila, according to prices from Tradition Financial Services. That’s within one basis point of the level reached on Feb. 1 that was the lowest since the notes were issued in November 2012.

The peso fell 0.1 percent to 40.622 per dollar, according to Tullett Prebon Plc. The currency has appreciated 1 percent this year, the third-best performance among Asia’s 11 most-active currencies. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points to 4.13 percent.

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