BPI Wealth, which helps manage around $26 billion in assets in the Philippines, is buying longer-term government bonds on expectation the central bank will trim interest rates as inflation eases in the months ahead.
(Bloomberg) — BPI Wealth, which helps manage around $26 billion in assets in the Philippines, is buying longer-term government bonds on expectation the central bank will trim interest rates as inflation eases in the months ahead.
“We have been building positions, taking advantage of the uptick in rates and adding duration,” Maria Theresa Marcial, president of the asset management arm of the Bank of the Philippine Islands, said in an interview. “We are betting that over the next 12 months, rates will peak and as rates go down, bond prices will improve.”
Philippine peso bonds have outperformed local notes in India and Indonesia, with a gain of more than 6% this year. While Governor Eli Remolona this month signaled the Bangko Sentral ng Pilipinas is open to raising interest rates again, some economists predict the monetary authority will start lowering them next year.
“It’s a good time to lock in and add positions,” Marcial said last week at her office in Manila. “The next six months would be an interesting window to watch and add those positions.”
Bank of America Corp. and Citigroup Inc. are among those predicting a rate cut in 2024. Philippine average inflation is forecast to slow to 3.2% next year from 5.8% this year, according to the International Monetary Fund.
The Philippine peso will probably strengthen to about 55 to 56 per dollar by the end of 2023 due to seasonal remittances from abroad, Marcial said. The peso traded at 56.78 per dollar on Monday.
“It’s the whole seasonality, the remittances that come in, plus it’s not peak importation season,” she said . “We’re hoping maybe it’s going to appreciate a little bit.”
(Corrects assets under management in first paragraph in story first published on Oct. 17)
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