Philippine bond yields set to climb after BSP's surprise 50-bp hike
The Philippines' Bureau of the Treasury faces a more expensive week of borrowing, with traders expecting yields on P90 billion of bills and bonds to reprice sharply higher after the Bangko Sentral ng Pilipinas delivered a surprise 50-basis-point rate hike on Thursday.
On Monday the Treasury auctions P55 billion in short-term securities: P10 billion in 35-day cash management bills, P20 billion in 91-day paper, P15 billion in 182-day bills and P10 billion in 364-day debt. On Tuesday it seeks P35 billion from a dual-tenor bond sale, split between P25 billion of seven-year debt with a remaining life of two years and 11 months, and P10 billion of 10-year bonds with nine years and three months left to run.
Secondary-market yields already moved ahead of the auctions. Friday's 35-, 91-, 182- and 364-day bill rates rose 5.05, 7.74, 8.24 and 11.48 basis points week on week to 5.3703%, 5.7538%, 6.1495% and 6.4341%, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System website. The seven-year bond climbed 9.18 basis points to 7.979%, while the 10-year note added 3.56 basis points to 8.054%.
"Expect the T-bill auction this week to reprice significantly higher following the surprise 50-bp hike," a trader said, while Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said short-term bill and bond yields could track the week-on-week increases at the secondary market amid the central bank's more hawkish stance. Only two of 22 analysts in a BusinessWorld poll had forecast the 50-bp move, the first of that size since February 2023 and the fourth straight increase this year, taking cumulative tightening since April to 125 basis points.
BSP Governor Eli M. Remolona, Jr. said further hikes are possible, with inflation seen staying elevated into next year. The central bank kept its 2026 forecast at 6.1% but raised its 2027 outlook to 6% from 5.4%, and held 2028 at 3.3%; headline inflation averaged 5.4% in the first nine months, well above the 3% target. Mr. Ricafort added that the peso's slide to fresh record lows raises imported inflation risks and could lift the odds of more tightening. The peso closed at a record low for a fifth straight session on Friday, weakening 9.5 centavos to P63.615 against the dollar.
Last week the Treasury raised P54.23 billion from its cash management bill and T-bill offering, just short of the P55-billion plan despite P92.212 billion in total tenders. It aims to raise P418 billion domestically this month, P168 billion through T-bills and P250 billion through T-bonds, to help fund a budget deficit capped at P1.659 trillion, or 5.4% of gross domestic product.
