Philippine Peso Gains Most Since September 2011; Bonds Surge

The Philippine peso strengthened the most since September 2011 and government bonds surged as the central bank said it’s not considering measures to curb outflows.

The currency extended gains after Chinese authorities said interbank liquidity risk is controllable, adding to speculation they will take steps to ease a cash crunch. Bangko Sentral ng Pilipinas isn’t thinking of measures to stem capital outflows, Governor Amando Tetangco said in a mobile-phone text message today. The peso fell 2.8 percent this month as Federal Reserve Chairman Ben S. Bernanke said June 19 the central bank’s stimulus program may be tapered this year and halted in 2014.

“The near-term rebound depends on the U.S. policy outlook, a calmer market and some stability in China liquidity conditions,” said Irene Cheung, a currency strategist in Singapore at Australia & New Zealand Banking Group.

The peso gained 0.9 percent to 43.475 per dollar in Manila, according to Tullet Prebon Plc. It reached an 18-month low of 44.2 on June 21. The yield on the 8 percent government bonds due July 2031 fell 50 basis points, or 0.5 percentage point, to 5.25 percent, according to prices from Tradition Financial Services. It jumped as high as 6.25 percent earlier.

The Philippines’ benchmark stock index dropped 3.1 percent today after being down as much as 4.9 percent earlier. Foreign investors pulled $391 million from local shares and bonds in the three weeks through June 21, according to research notes from ANZ, citing EPFR Global data.

The finance ministry plans to raise 150 billion pesos ($3.5 billion) from a sale of three- and five-year securities in the third quarter, Treasurer Rosalia de Leon said in a memorandum sent to traders today. It also plans to sell 30 billion pesos of 10-year retail notes next month, she said.

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