Inflation to peak later than expected -- BSP SINGAPORE -- Philippine inflation may peak later than previously thought but the target for 2011 is still in sight, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo yesterday said. Mr. Guinigundo told Reuters inflation may peak either in the third or fourth quarter of this year, and the average for 2011 would be in the target range of 3-5%. "It seems to be stabilizing and may peak between the third and fourth quarter," he said. "Directionally, the outlook for 2011 will be more favorable than what it was during the May meeting." The BSP had previously expected inflation to peak in the second or third quarter. The central bank raised its main policy rate at its past two reviews in March and May. Many analysts expect it to raise rates again at a review on Thursday. Mr. Guinigundo said even if key commodity prices eased, the impact of higher fuel and food prices earlier this year would keep the annual inflation rate high over coming months. "Even if we see some easing, the peak may not happen today but a number of months from now," he said. At the May 5 policy meeting, the BSP had forecast inflation would be near the upper end of its target range for 2011, even after it raised its key policy rates for the second consecutive meeting to 4.5%, a two-year high. Annual inflation in May was 4.5%, below market expectations but higher than the downwardly revised 4.3% increase in April. Core inflation, meanwhile, was 3.7% last month, also below forecast but the highest since September 2010. On Friday, central bank Governor Amando M. Tetangco, Jr. said the BSP would revise its inflation forecasts for 2011 and 2012 to determine if further action was needed at this week’s review Mr. Guinigundo said the central bank remained "positive" about growth despite the softening US economy, given the government’s improving finances, reflected in declining debt ratios, which meant "more of government revenue can be used to support growth as opposed to servicing debt." He said the government’s emphasis on infrastructure would ensure recent stronger-than-usual growth in Philippines was sustainable. --Reuters
The Bureau of the Treasury awarded only P735 million of the benchmark bills, falling short of the P1.5 billion it offered. Also, interest rates on the 364-day T-bill rose by 87.9 basis points to an average of 2.911 percent, while all tenders for the 182-day T-bill were rejected. The average for the 364-day bill was 71.4 basis points lower than the prevailing best bids at the Philippine Dealing and Exchange Corp., which was 3.625 percent. The BTr awarded the full amount of P4 billion in year-long bills. National Treasurer Roberto B. Tan said the auction results showed that investors were still uncertain about the Bangko Sentral ng Pilipinas’ next policy rate move. Market watchers disagree over whether policy rates would increase when the Monetary Board meets on Thursday. The auction committee “approved a partial award on 91-day T-bills (as opposed to a full rejection of tenders) to support the market trend (of rising rates),” Tan said. “We did not reject the tenders because the volume is good, which was almost double the offer. But overall, Monday’s auction was confused considering that bids for the 182-day bill were higher than the 364-day bill,” Tan added. The government raised a total of P4.735 billion, about half of the planned P9 billion. Investors tendered a total of P14.505 billion. Tenders for the three-month bill reached P2.865 billion—about twice the P1.5 billion offered. Bids for the six-month bill reached P3.31 billion, less than the offer of P3.5 billion. Tenders for the year-long bill totaled P8.33 billion, more than double the offer of P4 billion. |
U.S. Stocks Rise as Merger Announcements Help Offset Worries About Economy U.S. stocks rose, rebounding from six weeks of losses, as a pickup in takeovers and the cheapest valuations in almost a year helped offset concerns about a slowdown in the economic recovery. Transatlantic Holdings Inc. (TRH), the reinsurer formerly owned by American International Group Inc., surged 9.5 percent after agreeing to merge with Switzerland’s Allied World Assurance Company Holdings AG. Timberland Co. (TBL) rallied 44 percent as VF Corp. (VFC) said it will buy the footwear maker for $1.8 billion. Halliburton Co. and Freeport-McMoRan Copper & Gold Inc. slumped at least 1.2 percent amid falling commodity prices. The Standard & Poor’s 500 Index rose 0.1 percent to 1,271.83 at 4 p.m. in New York after dropping as much as 0.4 percent. The Dow Jones Industrial Average climbed 1.06 points, or less than 0.1 percent, to 11,952.97 after sliding for six straight weeks, the longest stretch since 2002. The Russell 2000 Index of small companies slipped 0.3 percent to 777.20 after erasing its gain for the year on June 10. About three stocks fell for every two that rose on U.S. exchanges.
Government debt rose earlier after Federal Reserve Bank of Richmond President Jeffrey Lacker said he has thought about lowering his forecast for U.S. growth and Standard & Poor’s cut Greece’s rating. Retail sales decreased last month and inflation slowed, government reports are forecast to show this week. “We’re battling back and forth across 3 percent in 10s,” said Richard Bryant, senior vice president for fixed income in New York at MF Global Inc., one of the 20 primary dealers that trade directly with the Fed. Yields on 10-year notes gained two basis points, or 0.02 percentage point, to 2.99 percent at 4:11 p.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent security due in May 2021 dropped 1/8, or $1.25 per $1,000 face amount, to 101 5/32. The 10-year note yields fell two basis points last week in their fourth straight five-day decrease and slid on June 9 to 2.92 percent, the lowest level since Dec. 3. Two-year note yields were little changed at 0.40 percent today after dropping last week for a ninth straight week. |
Crude Oil Declines for a Third Day in New York on Signals Demand Weakening Oil declined for a third day in New York as signs that the global economy is slowing stoked speculation that fuel demand may falter. Futures slipped as much as 0.5 percent today before reports that may show sales by U.S. retailers fell in May for the first time in 11 months and China’s industrial production slowed. Prices dropped to a four-week low yesterday after government data showed China’s oil-product consumption slid 4 percent in May and Standard & Poor’s cut Greece’s credit rating to the lowest held by a country. “Almost every day, there is some fresh economic data that seems to fit better in an anemic recovery than in one that is robust or dynamic,” Peter Beutel, the president of Cameron Hanover Inc., an energy advisory company in New Canaan, Connecticut, said in a note e-mailed today. Oil prices fell because of the “continuing fear that the global recovery may be losing steam and traction.” Crude for July delivery declined as much as 52 cents to $96.78 a barrel in electronic trading on the New York Mercantile Exchange, and was at $96.85 at 9:49 a.m. Sydney time. The contract yesterday slid $1.99, or 2 percent, to $97.30, the lowest since May 17. Prices are 29 percent higher the past year. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
BDO UNIBANK INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
