Philippine Peso Climbs to 3-Week High on Growth; Bonds Advance

The Philippine peso rose to a three-week high on speculation the fastest pace of economic growth in Southeast Asia will lure more overseas funds. Ten-year bond yields dropped to the lowest level in at least 15 years.

The $225 billion economy has reached a level of stability that will enable it to achieve 7 percent expansion, Anoop Singh, director of the Asia & Pacific Department at the International Monetary Fund, said at a forum in Manila. Gross domestic product increased 6.6 percent in 2012, the most in two years, and the government predicts growth of 6 percent to 7 percent in 2013.

The peso gained 0.2 percent to 40.618 per dollar at the close in Manila, according to Tullett Prebon Plc. It touched 40.605 earlier, the highest level since Feb. 20. The median estimate of 24 analysts surveyed by Bloomberg is for the currency to breach 39 by year-end.

“Investors are still bullish on the Philippine story and the consensus is for the peso to rise to the 39 level,” said Toto Hilado, executive vice president at Rizal Commercial Banking Corp. in Manila. “We’re seeing more inflows into stocks and other assets.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 15 basis points to 3.72 percent. The peso has appreciated 5.2 percent in the past 12 months, the best performance among 25 emerging-market currencies tracked by Bloomberg.

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Net inflows into the nation’s stocks and debt climbed to $1.3 billion in January, almost six times the $213 million in December, the central bank reported Feb. 14. The Philippine Stock Exchange Index reached a record high yesterday and has rallied 17 percent this year. The measure fell 0.4 percent today.

Bangko Sentral ng Pilipinas can’t rule out a further cut in interest rates on special-deposit accounts, Governor Amando Tetangco said today at the same forum. The government is closely watching asset markets “prone to bubbly behavior,” he said, citing the equity and property sectors. The government is watching capital flows and is preparing for outflow risks, Finance Secretary Cesar Purisima added.

Funds in the accounts rose to 1.9 trillion pesos ($45.7 billion) as of Feb. 15 from about 1.7 trillion pesos in January, according to central bank data. The economy grew 6.6 percent in 2012, based on data compiled by Bloomberg.

Bangko Sentral will keep its benchmark overnight borrowing rate at a record low 3.5 percent on March 14, according to all 16 economist estimates in a Bloomberg News survey.

The central bank is moving to an “interest-rate corridor approach,” Tetangco said today, referring to a band that will give BSP greater policy flexibility. The reduction in the SDA rate to 3 percent from more than 3.5 percent in January was an “initial step” to a transition to a policy band, the governor said last week.

The yield on the 13 percent bonds due February 2023 fell 16 basis points, or 0.16 percentage point, to 3.5 percent, according to midday fixing prices at Philippine Dealing & Exchange Corp. That’s the lowest rate for a benchmark 10-year note since Bloomberg started tracking the data in October 1998.

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