Philippine Bonds Gain on Special Deposit Rate-Cut Speculation

Philippine seven-year government bonds gained the most in more than a month on speculation the central bank will cut the interest rate on its special-deposit accounts for a third time this year.

Bangko Sentral ng Pilipinas Governor Amando Tetangco said April 3 that the monetary authority may lower the rate again if there is room. The next policy review meeting is scheduled for April 25. Philippine bonds have returned 12.7 percent this year, the most among 10 local-debt indexes in emerging Asia compiled by HSBC Holdings Plc.

“The market expects another cut in the SDA,” said Briace Santos, a fixed-income trader who helps manage the equivalent of $18 billion at BPI Asset Management Inc. in Manila. “Market players have started buying bonds ahead of next week’s central bank meeting.”

The yield on the 7.75 percent government bonds due February 2020 dropped 29 basis points, or 0.29 percentage point, to 3.39 percent, according to noon fixing prices from the Philippine Dealing & Exchange Corp. That was the biggest slide since March 6.

Policy makers cut the rate on all SDAs to 2.5 percent on March 14 as they stepped up efforts to curb inflows and restrain currency gains.

The peso rose for the first time in three days today, advancing 0.05 percent to 41.243 per dollar, according to prices from Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, increased four basis points to 4.75 percent.

The currency lost 1 percent this month, extending the 0.4 percent drop in March.

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