Philippine 25-Year Bonds End Rally After Yield Dropped to Record

Philippine 25-year government bonds fell, halting a four-day gain, on speculation a 33 basis point drop in yields this month made the debt expensive. The peso rose for a second day.

The yield reached a record low of 5.25 percent yesterday after the central bank reduced the interest paid on almost 1.7 trillion pesos ($41.8 billion) in special-deposit accounts to curb currency speculation. Philippine bonds returned 2.7 percent this year, the most among 10 Asian indexes compiled by HSBC Holdings Plc.

“Bond yields are rising from yesterday’s low on profit-taking,” said Jill Singian, a fixed-income portfolio manager at Bank of the Philippine Islands in Manila. “The greater magnitude of the decline in yields was because of the SDA rate cut. In the medium term, we’re still bond-positive.”

The yield on the 6.125 percent notes due October 2037 rose three basis points, or 0.03 percentage point, to 5.28 percent as of 4:08 p.m. local time, according to prices from Tradition Financial Services.

The economy expanded 6.3 percent in the three months through December from a year earlier, after growing 7.1 percent in the prior quarter, according to the median estimate of economists in a Bloomberg News survey before data due tomorrow.

Gross domestic product “definitely” increased more than the 5 percent to 6 percent goal last year, President Benigno Aquino said yesterday. Inflation will probably be 2.5 percent to 3.4 percent this month, after averaging 3.2 percent in 2012, central bank Governor Amando Tetangco said Jan. 28.

The peso strengthened 0.2 percent to 40.630 per dollar in Manila, according to Tullett Prebon Plc. It reached 40.550 on Jan. 14, the strongest level since March 2008. The currency appreciated 1 percent in January, the third-best performance among Asia’s 11 most-active exchange rates.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, was unchanged at 4.5 percent.

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