Philippine bonds maturing in 2037 posted the biggest weekly loss in a month as odds the Federal Reserve will taper debt purchases damped demand for emerging-market assets, while local inflation accelerated.
The peso dropped for the week as global investors trimmed their share holdings by a net 14 percent in 2013, stock exchange data show. Consumer prices climbed 2.8 percent in June from a year earlier, more than the 2.6 percent increase in May and the 2.7 percent median forecast in a Bloomberg News survey.
“Yields on the longer-dated debt are higher, driven by concern over outflow pressure arising from possible quantitative easing in the U.S.,” said Wee-Khoon Chong, a strategist in Hong Kong at Societe Generale SA. “Yields are expected to rise further as there’s little sign the central bank will ease borrowing costs from here.”
The yield on the 6.125 percent government notes due October 2037 surged 40 basis points, or 0.40 percentage point, to 5.6 percent this week in Manila, according to prices from Tradition Financial Services. The rate slipped 15 basis points today and is up 125 basis points since May 31.
Policy makers last cut the overnight reverse-repurchase rate by 25 basis points to 3.5 percent in October. Instead, they opted to lower interest rates on special-deposit accounts three times in 2013, with the most recent reduction on April 25.
Bangko Sentral ng Pilipinas will keep the key rate unchanged this quarter, according to 15 of 17 economists in a separate Bloomberg survey. Two forecast an increase to 3.75 percent.
U.S. 10-year yields advanced 50 basis points to 2.54 percent since May 22, when the Fed first indicated it may taper its $85 billion of monthly bond purchases if there’s a sustained improvement in the U.S. jobs market.
The U.S. Labor Department may report today that companies added 165,000 workers last month, compared with 175,000 in May, according to the median estimate of economists surveyed by Bloomberg News.
The peso advanced 0.1 percent today to 43.405 per dollar, trimming this week’s drop to 0.5 percent, Tullett Prebon Plc prices showed. It fell 5.5 percent last quarter, the biggest three-month loss since the period ended June 2008.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 29 basis points this week and nine basis points today to 7.63 percent.