The Philippine peso and Indonesian rupiah ended lower compared to Asian peers on Wednesday as falling local yields and pressure on the currencies from rate cuts dented their appeal, keeping them from enjoying broader gains fuelled by upbeat Chinese data.
The peso eased 0.2 percent against the dollar, while stocks in the country slipped 1 percent and were on course for a third-straight week of losses.
Philippine 10-year bonds saw yields dive half a percentage point at the start of the week to 2.8 percent and have clung to similar levels since, after the central bank unexpectedly cut interest rates by 50 basis points to a new low last week.
While the rate cut – the fourth this year – sapped gains in the peso, demand for Philippines’ bonds was still unaffected, with a fresh auction on Monday being oversubscribed.
“Investors must come to terms with the lower yields in their global hunt, keeping in mind that such an environment is supportive of the fiscal financing needed to tackle the economic effects of COVID-19,” said Han Tan, market analyst at FXTM.
“Despite the recent yield drop, the Philippines still offers higher yields compared to South Korea, Thailand, and Taiwan on the 10-year benchmarks.”
In Indonesia, inflationary concerns lingered after the government on Monday said Bank Indonesia (BI) would buy low yielding bonds, including those with zero yield, to finance a ballooning fiscal deficit caused by spending to fight the pandemic. — Reuters
