Philippine government securities yields rise as peso weakens and BSP rate hike looms
Yields on Philippine government securities climbed an average of 7.82 basis points week on week as peso weakness, elevated inflation and expectations of another Bangko Sentral ng Pilipinas rate hike dampened market appetite. Volume traded fell to P19.94 billion from P27.98 billion the prior week.
Yields on Philippine government securities (GS) climbed last week as the peso's weakness, elevated inflation, and expectations of another rate hike from the Bangko Sentral ng Pilipinas (BSP) dampened market appetite. GS yields, which move opposite to prices, went up 7.82 basis points (bps) on average week on week, based on PHP Bloomberg Valuation Service Reference Rates data as of 16 Oct published on the Philippine Dealing System's website.
At the short end of the curve, yields on the 91- and 182-day Treasury bills went down by 8.51 bps (to 5.6764%) and 2.49 bps (6.0671%) week on week, respectively. Meanwhile, the one-year T-bill rose 11.12 bps to yield 6.3193%. At the belly, yields were higher across all tenors. Rates of the two-, three-, four-, five-, and seven-year Treasury bonds rose by 8.75 bps (to 7.0607%), 7.64 bps (7.3261%), 5.57 bps (7.5231%), 4.9 bps (7.6738%), and 7.37 bps (7.8872%).
Rates at the long end also surged week on week. Yields on the 10-, 20- and 25-year notes climbed by 14.47 bps (to 8.0184%), 18.8 bps (8.3856%), and 18.45 bps (8.3848%), respectively. GS volume traded reached P19.94 billion, lower than the P27.98 billion recorded the prior week.
"Philippine GS yields remained under upward pressure during the week, particularly in the short- to intermediate-tenor segment, as continued peso weakness and elevated oil prices reinforced expectations of further BSP tightening," a bond trader said. "Investors also remained cautious about extending duration. The market is increasingly pricing in another 25-bp hike, potentially as early as the October meeting, bringing the policy rate to 5.25%."
On Thursday, the peso slid to the P63 level against the US dollar for the first time in history, closing at a new all-time low of P63.06. It also posted a fresh record intraday trough of P63.23 on Friday. Philippine headline inflation accelerated to a three-and-a-half year high of 7.2% in September after the prices of fuel, food, housing and utilities surged. This was faster than the 6.1% in August and 1.7% in September 2025 and matched this year's peak first recorded in April.
A BusinessWorld poll conducted last week showed 20 of 22 economists expect the Monetary Board to raise the target reverse repurchase rate by 25 bps for a fourth consecutive meeting to 5.25% at its meeting on Thursday. This would match the benchmark rate set in June 2025 and will be the highest in one-and-a-half years or since 5.5% in April 2025. The BSP has already hiked key borrowing costs by a total of 75 bps since April.
Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said that higher inflation in both the Philippines and the US is pushing up GS yields. "The Philippine bond market is not entirely decoupled from the US, but domestic factors are increasingly driving local yields," the bond trader added. For this week, Mr Ravelas said GS yields may continue to move sideways to higher.
