Philippine three-year bonds dropped, pushing yields to a one-week high, as higher oil prices threatened to fan inflation. Crude surged 4.5 percent to $112.79 a barrel last week in New York, before retreating 0.4 percent today. Bangko Sentral ng Pilipinas may raise borrowing costs again this year because of inflation risks from higher commodity prices, Governor Amando Tetangco said in a Bloomberg TV interview today from Beijing. A stronger peso helps damp inflationary pressures, he said. “There are inflation worries going forward and we still expect the central bank to raise interest rates at their next policy meeting,” said Rafael Algarra, executive vice president and treasurer at Security Bank Corp. in Manila. “The strengthening of the peso should help temper some inflation pressure.” The yield on the 6.25 percent bond due January 2014 climbed 25 basis points, or 0.25 percentage point, to close at 5 percent in Manila, according to Amstel Financial Services. Consumer prices rose 4.3 percent from a year earlier in each of the last two months, the biggest gains since May 2010. Inflation this year may average closer to the top end of the central bank’s target range of 3 percent to 5 percent, Tetangco said. The monetary authority raised its benchmark rate by a quarter of a percentage point to 4.25 percent on March 24, the first increase since August 2008. The peso weakened 0.2 percent to 43.083 per dollar, according to Tullett Prebon Plc. The currency has strengthened 1.6 percent this year. To contact the reporter for this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net. To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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