Philippines: More rate cuts likely, bonds 'ripe' for a rally

Philippine sovereign bonds may rally in the coming months as slowing growth and easing inflation boost the case for further interest-rate cuts.

The yield on the country’s 10-year sovereign bonds might fall to as low as 5.5% this year from its current level of 6.2%, according to a Rizal Commercial Banking Corp. analyst.

Bangko Sentral ng Pilipinas (BSP) bank chief Eli Remolona has said 75 basis points of additional rate cuts are possible this year after the economy expanded more slowly than expected in the first quarter.

Philippine bond yields “are liable to move lower, producing capital gains for bondholders, especially given Bangko Sentral ng Pilipinas’s open desire to ease monetary policy,” said Philip McNicholas, Asia sovereign strategist at Robeco.

If markets anticipate that the BSP will start cutting rates, investors buy bonds now to lock in higher yields before they fall.

It's a forward-looking behaviour: Bond markets tend to move ahead of actual rate decisions. Even talk of easing can trigger a rally.

As rate cuts come in, new bonds will offer lower yields, making existing higher-yielding bonds more valuable.

Inflation

Rice, which account for about 10% of the consumer price index basket — is a critical driver here, but core inflation gauges are reasonably contained, he said.

Global markets have been whipsawed by tariff announcements from US President Donald Trump, and the Philippines is standing out for investors given it is less reliant on trade.

Gainers

The nation’s local currency bonds have been among the top gainers in Asia this month, data compiled by Bloomberg show, after lagging peers like Thailand and Indonesia earlier in 2025. 

The Philippines was also given a lower US levy than many regional peers. The peso, meanwhile, has advanced about 3.6% this year, further adding to the bonds’ allure.   

“A benign inflation environment and a strong peso — that’s a very good combination actually for the bonds to rally,” said Michael Ricafort, chief economist at Rizal Commercial in Manila.