Philippine Peso Has Worst Week Since 2010 on Fed; Bonds Decline

The Philippine peso posted its worst weekly loss in more than two years on speculation U.S. policy makers will trim monetary stimulus that fueled capital inflows.

The Federal Reserve may cut its monthly bond purchases to $65 billion in September and stop buying in June 2014, according to estimates by economists in a Bloomberg survey, after Chairman Ben S. Bernanke signaled the start of tapering this year if the economy improves in line with projections. The yield on the Philippines five-year bonds rose the most in more than two years after Treasurer Rosalia de Leon said yesterday she’s in talks with six banks on a plan to sell peso debt to individuals.

“There is a lingering concern the liquidity that drove the rally in emerging markets will subside,” said Lito Mercado, head of trading at Rizal Commercial Banking Corp. in Manila. “There is also some supply concerns on retail bonds.”

The peso fell 2.1 percent this week to 43.735 per dollar at the close in Manila, its biggest drop since November 2010, according to Tullett Prebon Plc. The currency rose 0.1 percent today after touching 44.20 earlier, the weakest level since Jan. 9, 2012.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 33 basis points, or 0.33 percentage point, to 9.47 percent

Bangko Sentral ng Pilipinas will keep a strategic presence in the currency markets, Governor Amando Tetangco said yesterday. The peso is affected by external events, Assistant Governor Cyd Amador said today.

The yield on the 2.125 percent government bonds due May 2018 rose 35 basis points to 3.165 percent today, according to midday fixing prices at Philippine Dealing & Exchange Corp. That’s the highest level for a benchmark five-year note since April 29 and the biggest increase since February 2011, based on data compiled by Bloomberg.

The Philippines sold a record 188 billion pesos ($4.3 billion) of 25-year retail bonds in October 2012. The Treasury will release its third-quarter auction plan before month-end.

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