Philippine peso bond yields inched up on Friday as investors pared exposure ahead of a debt auction next week and on expectations that the central bank may soon raise rates on some of its lending facilities.
The market expects the central bank to start raising policy rates in the second half of 2010, but policymakers may increase borrowing costs on other lending facilities such as the peso rediscounting window, traders said. "We are already seeing yields creeping up in the last few sessions as the market positions for the implementation of a tighter monetary policy," a local trader said.
The yield on the liquid Philippine 4-year bonds rose 2 basis points (bps) to 6.04 percent against its Thursday's close, Manila-based traders said. The 7-year bond rose to 7.08 percent from 7.06 percent. This week, yields on average have risen by 5 bps across the curve, with the belly going up by 8 bps, the trader said. In Thailand, local debt yields eased on expectations the central bank would delay any rate rise until later in 2010.
Central bank Deputy Governor Bandid Nijathaworn on Thursday said authorities expect to adopt measures to tighten monetary policy later this year, adding the current rise in inflation is not putting undue pressure on inflation targets. The yield on the benchmark 5-year bond eased 5 bps to 3.15 percent, while the 10-year debt yield was down 3 bps to 4.20 percent, a trader said.
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