Philippine 2032 Bonds Decline as Seen Expensive After Rally

Philippine government bonds due 2032 fell after a rally that drove the yield to a record low last week prompted some investors to judge the notes too expensive. The peso was little changed.

The yield on the 5.875 percent securities due March 2032 rose two basis points, or 0.02 percentage point, to 5.09 percent as of 4:19 p.m. local time, according to prices from Tradition Financial Services. The rate has fallen 52 basis points this year and reached 5 percent on Feb. 1, the lowest level since the securities were issued in February 2012.

The central bank reduced the interest paid on almost 1.7 trillion pesos ($42 billion) in special-deposit accounts on Jan. 24 to curb currency speculation. There are 215 billion pesos of sovereign bonds and bills maturing this quarter, which should support secondary-market prices, according to Bank of the Philippine Islands.

“There’s still some upward bias on yields due to profit-taking,” said Jill Singian, a fixed-income portfolio manager at Bank of the Philippine Islands in Manila. Bonds “continue to be supported by portfolio re-balancing from the SDA cut and the reinvestment requirements in the first quarter,” she said.

Philippine debt returned 3.2 percent in 2013, the most among 10 Asian indexes compiled by HSBC Holdings Plc.

The peso was little changed at 40.655 per dollar in Manila, according to Tullett Prebon Plc. It reached 40.550 on Jan. 14, the strongest level since March 2008, and has advanced 1 percent this year. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 25 basis points to 4.25 percent.

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