Philippine Bonds Decline, Peso Weakens on Fed Stimulus Concern

Philippine bonds due 2031 fell for a third day and the peso weakened before data forecast to show the U.S. economy is improving, bolstering the case for the Federal Reserve to taper bond purchases that boost dollar supply.

The Bloomberg U.S. Dollar Index, which measures the greenback against 10 major currencies, touched the highest level since June 2010 ahead of reports today that will show employers added the most workers in June since February and service industries grew at the fastest pace in three months, according to Bloomberg surveys. Bangko Sentral ng Pilipinas Governor Amando Tetangco said yesterday authorities are monitoring prices in the markets as well as fund flows.

“Asian currencies, including the peso, are reflecting the global risk aversion because of this risk on the withdrawal of the Fed’s quantitative easing,” said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group Plc in Singapore.

The yield on the 8 percent government bonds due July 2031 rose 10 basis points, or 0.1 percentage point, to 5.2 percent as of 4:15 p.m. in Manila, according to prices from Tradition Financial Services. It has increased 38 basis points this week.

U.S. 10-year yields advanced 39 basis points to 2.43 percent since May 22, when the Fed first indicated it might taper its $85 billion of monthly bond purchases if there was a sustained improvement in the U.S. jobs market.

The peso declined 0.3 percent to 43.46 per dollar, Tullett Prebon Plc data show. The currency touched 44.20 on June 21, the weakest level since January 2012, and lost 5.5 percent in the second quarter. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed eight basis points to 7.69 percent.

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