YIELDS on government debt paper are expected to change minimally in the remaining weeks of the year despite pressure from rising consumer prices that continue to grow faster in the past five months.

According to the latest study on the domestic economy from First Metro Investment Corp. and UA&P Capital Markets Research, the peso’s appreciation due to the influx of net portfolio investment and remittances from overseas Filipinos will temper the effects of creeping inflation on interest rates.

“We expect yields to go sideways in general,” the study said. The stronger peso “and weak loan demand could mean that there could be excess liquidity, which should raise demand for short maturity bonds.”

The study noted that with the recent rejection of some bids for Treasury bills and bonds, the supply for government debt paper had become tighter as maturing T-bills were not being replaced.

The study showed that from Sept. 28 to Oct. 12, the Bureau of the Treasury’s offerings worth P20 billion received almost twice as much tenders, but the government awarded only 58 percent during that period.

National Treasurer Roberto B. Tan said that the rejection of tenders was due to investors’ demand for yields that were not reasonable in relation to prevailing market rates.

“The market thought that the government would be forced to accept higher bids because of its increasing financing needs,” the study said.

But what the government did last month was to turn to the foreign markets, issuing $1 billion in dollar-denominated 25-year global bonds.

Ironically, 25 percent of the proceeds came from buyers in the Philippines.

“We expect an increase in demand for any auction of government paper,” FMIC and UA&P CMR said.

Also, the study said the easing of supply pressures in the aftermath of the global bond issuance, as well as inflows from the Asian Development Bank and the World Bank, tempered the financing needs for reconstruction projects.

“Around a third of reconstruction expenditures may come from foreign aid,” it added.

According to Finance Secretary Margarito B. Teves, the latest estimate on damage from the recent storms was pegged at P36 billion.

Also, recovery and reconstruction efforts are expected to raise this amount.