Philippine Bonds Retreat as Gains Judged Excessive; Peso Steady

Philippine government bonds due 2037 fell for a second day on speculation some investors judged recent gains excessive after the yield reached a record low last week. The peso was steady.

The rate has dropped 52 basis points in the past month after Bangko Sentral ng Pilipinas Governor Amando Tetangco said Jan. 25 the nation is set to win its first investment-grade credit rating in the first half. Authorities are looking at an “array of instruments” to manage capital inflows, Assistant Governor Cyd Amador told reporters in Manila on Feb. 22.

“Some players decided to lock in gains,” said Jan Briace Santos, a debt trader who helps manage the equivalent of $18 billion at BPI Asset Management Inc. in Manila. “The market may also be waiting for more developments on plans by the BSP on how they will manage inflows.”

The yield on the government’s 6.125 percent bonds due October 2037 climbed one basis point, or 0.01 percentage point, to 4.88 percent as of 4:08 p.m. in Manila, according to prices from Tradition Financial Services. The rate touched 4.87 percent on Feb. 21, the lowest since the notes were issued in October 2012.

Policy makers meet to review borrowing costs on March 14 after reducing rates on the central bank’s special-deposit accounts last month to curb speculation in the peso.

The Philippine currency was little changed at 40.688 per dollar, according to Tullett Prebon Plc. It has appreciated 5.2 percent in the past year, the best performance among Asia’s 11 most-active currencies. One-month implied volatility in the peso, a measure of expected moves in the exchange rate used to price options, was unchanged at 3.9 percent.

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