Government‑security yields showed mixed movements last week as renewed Middle‑East tensions heightened market volatility while softer‑than‑expected U.S. inflation data prompted a reassessment of Federal Reserve policy expectations.
Based on the PHP Bloomberg Valuation Service Reference Rates as of July 17, average yields rose by 7.4 basis points week‑on‑week in the secondary market.
At the short end, the 91‑day Treasury bill edged up 0.24 bp to 5.061 % and the 364‑day bill increased 2.93 bp to 5.9811 %, while the 182‑day bill fell 4.52 bp to 5.5324 %.
Mid‑term Treasury bonds climbed across the board: two‑year yields rose 13.05 bp to 6.5547 %, three‑year up 16.03 bp to 6.8199 %, four‑year up 17.75 bp to 7.014 %, five‑year up 18.17 bp to 7.146 %, and seven‑year up 15.95 bp to 7.3008 %.
On the long end, the 10‑year bond ticked higher by 1.92 bp to 7.2826 %, while the 20‑year and 25‑year issues slipped marginally by 0.08 bp and 0.03 bp to 7.0325 % and 7.0323 % respectively.
Weekly trading volume reached P23.49 billion, surpassing the previous week’s P22.65 billion.
Risk‑off sentiment intensified after headlines of retaliatory strikes between the United States and Iran, prompting a sell‑off in the local fixed‑income market.
The United States reported an eighth consecutive night of attacks against Iran following casualties involving U.S. personnel, while the interim ceasefire signed a month earlier collapsed, raising the prospect of broader conflict.
Analysts described the yield curve as a “tug‑of‑war” between geopolitical risk and easing U.S. inflation. Softer inflation data reinforced expectations of future Fed rate cuts, anchoring long‑term yields, whereas rising oil prices and heightened inflation concerns kept upward pressure on yields globally.
Fed‑funds futures continue to signal expectations of further U.S. rate hikes aimed at bringing inflation back to the 2 % target.
The Bureau of the Treasury rejected all bids for the reissued 10‑year bond auction, providing a temporary reprieve; acceptance of the bids would have set an average yield of 7.575 %.
This rejection highlighted market demand for higher risk premiums amid persistent geopolitical uncertainty and inflation worries, while cautious central‑bank policy and potential weather‑related supply shocks kept investors defensive, especially on medium to long maturities.
Looking ahead, analysts expect continued monitoring of Middle‑East developments. Persistent tensions and rising energy prices could push yields higher, whereas de‑escalation and benign inflation data may stabilize them. For now, elevated volatility is likely, with the yield curve expected to remain relatively flat and biased toward modestly higher yields.
