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Peso loses 54 centavos; 20-year bond rate rises


MANILA, Philippines - The peso fell steeply Tuesday, tracking the global equity markets that plunged following a US panel statement that confirmed the world’s largest economy is already in a recession. The peso closed at P49.50 per dollar, sliding by 54 centavos from its close of P48.96 on Friday. It opened at the day’s high of P49.10 and plummeted to a low of P49.51 before firming up at the day’s close. A total of $582 million changed hands within the day, lower than $616.9 million last Friday. "The peso’s fall was in line with the movement of Dow Jones," a currency trader said. Dow Jones declined by 679.95 points or 7.7% to 8,149.09 after the Business Cycle Dating Cycle of the National Bureau of Economic Research said the US has been in a recession since end-2007. US data also pointing to modest growth in holiday shopping sales all the more prompted investors to pull out their funds from equities. Local stocks followed Wall Street, with the Philippine Stock Exchange index dropping 91.70 points or 4.65% to 1,879.87 Another trader said the peso was weak due to the strength of the dollar versus a multitude of currencies, coupled by slow inflows of remittances from Filipinos living and working overseas. "If there were no inflows, I doubt if the peso will find support," the trader said. "We’ll see this week how much will come in. We’re expecting lower inflows because the job market might get hit by the slowdown in the US," he added. The trader said the peso will be influenced by the movements of markets in the US and Europe. Given the volatility in the global financial markets, the peso might go as low as P49.90 this week, the trader said. Meanwhile, the rate of 20-year Treasury bonds rose at Tuesday’s auction, but the government made a partial award to cap the rise. The 20-year T-bond fetched a coupon rate of 9.5%, up from 8.599% when it was auctioned on Sept. 4, 2007. The debt paper was more than twice oversubscribed as total tenders reached P13.37 billion against a P6-billion offer. The government awarded only P4.92 billion as bids went to as high as 10%. Despite the increase in rates, National Treasurer Roberto B. Tan noted the high demand for the long-term debt paper. He said the relatively good rate was due to expectations inflation will continue to decline. "The direction of inflation rate looks clear. The outlook is now predictable," Mr. Tan said. The government is scheduled to borrow P6 billion worth of T-bills next week, during the last auction for the year. Mr. Tan also said the government will no longer borrow an additional of $750 million in the global capital market given its strong cash position. "We don’t need to borrow overseas this year. We have enough buffer for any scenario." — Gerard S. dela Peña, BusinessWorld
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