Philippine Bond Yield Drops to Record on Probable Deposit Curbs

Philippine government bonds due 2019 advanced, pushing the yield to a record low, on speculation more investors will shift money to fixed-income securities from the central bank’s special-deposit accounts.

Bangko Sentral ng Pilipinas Governor Amando Tetangco said Feb. 15 authorities will rationalize access to these accounts to keep them as a liquidity management tool and not an investment outlet. The yield on the six-year notes has fallen 47 basis points since Jan. 23, the day before the monetary authority cut the interest rate on SDAs to 3 percent from more than 3.5 percent to curb currency speculation.

“We anticipate further softness in bond yields,” said Joey Cuyegkeng, an economist in Manila at ING Groep NV. “There’s anticipation of further SDA measures in the near term. Inflation expectations remain quite muted.”

The yield on the government’s 3.875 percent bonds due November 2019 slid 15 basis points, or 0.15 percentage point, to 3.42 percent as of 4:10 p.m. in Manila, according to prices from Tradition Financial Services. That’s the biggest decline since Feb. 1 and the lowest level since the notes were issued in November 2012.

Consumer prices rose 3 percent in January from a year earlier, official data show. The central bank expects inflation will stay between 3 percent and 5 percent until 2015, which will provide support for credit and liquidity growth, Deputy Governor Diwa Guinigundo said at a media briefing in Manila on Feb. 13.

The peso was little changed at 40.632 per dollar, according to Tullett Prebon Plc. The currency has advanced 1.1 percent this year, the second-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, held at 4 percent.

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