Philippines 10-Year Yield Hits 8-Year High

The Philippines’ 10-year government bond yield climbed to 8.10% in late October, its highest level since October 2018, following the Bangko Sentral ng Pilipinas’ (BSP) larger-than-expected rate hike. The central bank raised its key policy rate by 50 bps to 5.50%, exceeding expectations for a 25 bps increase and marking its fourth consecutive hike this year. The decision came as annual inflation accelerated to 7.2% in September from 6.1% in August, overshooting forecasts of 6.6% and matching April’s three-year high. Higher global oil prices amid the ongoing Middle East tensions and potential El Niño-related supply disruptions threaten to sustain inflationary pressures, while peso weakness raises the cost of imported goods. Meanwhile, subdued demand at recent government bond auctions added to upward pressure on yields, as investors demanded higher returns to compensate for persistent inflation risks.

Philippines 10 Year Government Bond Yield increased to 8.10%, the highest since October 2018. Over the past 4 weeks, Philippines 10Y Bond Yield gained 52.70 basis points, and in the last 12 months, it increased 215.60 basis points.

The Philippines’ 10-year government bond yield surged toward 8%, hitting its highest level since late October 2018, as faster inflation and softer demand at government debt auctions weighed on bonds. Headline inflation accelerated to 7.2% in September from 6.1% in August, overshooting forecasts of 6.6% and matching April’s three-year high. The reading boosted expectations for another interest-rate increase by the Bangko Sentral ng Pilipinas, after policymakers already raised rates three times this year. Additionally, the peso has weakened about 6% so far, increasing imported-inflation risks. Elevated oil and food prices, along with risks from an El Niño-related drought, could prolong inflationary pressures, reinforcing expectations for a longer restrictive monetary policy stance. Meanwhile, demand for government debt has weakened, with the bid-to-cover ratio at a September five-year bond auction falling to 1.22, the lowest for the tenor since 2013.