Philippine 2015 Bond Yield Rises Most in Two Years; Peso Gains

Philippine two-year bonds fell, with the yield rising the most in two years, on speculation faster inflation will forestall further monetary easing. The peso rose.

Consumer prices may have climbed as much as 3.7 percent this month, central bank Governor Amando Tetangco said yesterday. That would be the fastest since August and compares with 3 percent in January, a three-month high. Federal Reserve Chairman Ben S. Bernanke defended the U.S. authority’s bond-buying program yesterday after minutes of the Federal Open Market Committee’s Jan. 29-30 meeting released last week showed policy makers were divided about the strategy.

“The curve steepened on some inflation concern, continuing debate on the extent of U.S. quantitative easing and renewed uncertainty in Europe,” said Bunny Bernardo-Recto, vice president at Chinatrust Philippines Commercial Bank Corp. in Manila.

The yield on the 12.375 percent peso bonds due February 2015 rose 27 basis points, or 0.27 percentage point, to 2.73 percent, posting its steepest increase since Feb. 9, 2011, according to midday fixing prices at Philippine Dealing & Exchange Corp. The yield on the benchmark 10-year debt advanced 11 basis points to 4.27 percent.

The peso gained 0.1 percent to 40.713 per dollar at the close in Manila, according to Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, was unchanged at 3.9 percent.

Bangko Sentral ng Pilipinas cut the rate it pays on about $42 billion in special-deposit accounts to 3 percent from more than 3.5 percent last month, while maintaining the benchmark overnight borrowing rate at a record low 3.5 percent. There is room to further refine the special accounts to keep it as a liquidity management tool and not an investment outlet, Tetangco said on Feb. 15.

Refine Operations

Bangko Sentral will consider further prudential measures as appropriate “to aid market participants in correctly pricing and perceiving risks,” Tetangco said in a mobile-phone message today. “We could also further refine our conduct of monetary operations.”

The peso is the best-performing Asian and emerging-market currency in the past 12 months.

The Bureau of Internal Revenue, the main tax agency, collected 94.7 billion pesos in January ($2.3 billion), 11.3 percent higher than a year ago, missing its revenue goal of 100.9 billion pesos.

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