Government securities yields rose last week amid heightened Middle East tensions, offsetting earlier declines after softer June consumer price index data. The increase reflects renewed concerns over oil prices and inflation.
According to the Philippine Dealing System’s reference rates, average yields on government securities increased by 6.42 basis points week‑on‑week. The data were published on July 10.
Short‑term Treasury bills showed mixed movement: the 182‑day and 364‑day bills rose by 4.69 and 0.41 basis points to 5.5776% and 5.9518% respectively, while the 91‑day bill fell 6.6 basis points to 5.0577%.
Yields on mid‑term bonds climbed across the board, with two‑year, three‑year, four‑year, five‑year and seven‑year Treasury bonds gaining 8.06, 11.12, 12.51, 13.52 and 16.18 basis points, reaching 6.4242% to 7.1413% respectively.
At the long end, the 10‑year note rose 11.52 basis points to 7.2634%, while the 20‑year and 25‑year securities slipped slightly to 7.0333% and 7.0326%.
Trading volume in the government securities market fell sharply to 22.65 billion pesos, down from 50.89 billion pesos the previous week.
Economist Marco Antonio C. Agonia noted that initial yield declines driven by softer inflation expectations were quickly reversed as investors took profits and refocused on geopolitical risks. He said the market’s shift was swift and pronounced.
He added that the rise in yields at the belly and tail of the curve reflects renewed concerns over inflation amid the latest Middle East flare‑up.
Recent US strikes on Iran and Iran’s closure of the Strait of Hormuz have intensified market anxiety, prompting expectations of higher oil prices and sustained price pressures.
Chief investment officer Alessandra P. Araullo said the escalation in US‑Iran tensions lifted yields, underscoring the potential for sharp oil price increases and their impact on inflation.
She observed that market participants remain cautious about duration exposure, as monetary policy may need to stay restrictive longer, and that external geopolitical developments have outweighed the modest drop in headline inflation.
Philippine headline inflation eased to 6.4% in June from 6.8% in May, but core inflation accelerated to 4.4%, the fastest pace in over two years, keeping price‑pressure concerns alive.
Araullo highlighted that core inflation, combined with the threat of a strong El Niño, sustains elevated yields, while investors also watch US labor data and Federal Reserve policy signals.
The US labor market’s resilience and the Federal Reserve’s cautious stance have helped keep global yields high, influencing local market sentiment.
Agonia expects yields to remain driven by developments in the US‑Iran conflict, foreign‑exchange movements, and monetary‑policy guidance from the Bangko Sentral ng Pilipinas.
He warned that further escalation in the Middle East could push yields higher, especially at the belly and tail of the curve.
Market participants anticipate a volatile yield curve in the near term as they weigh geopolitical risks and reassess inflation expectations.
Analysts advise close monitoring of the US‑Iran situation, global energy prices, upcoming US economic data, and central‑bank policy cues, while domestic inflation trends and BSP commentary will remain pivotal for yield direction.
