MANILA, Nov 17 (Reuters) - Philippine debt yields are seen shackled to a tight range for most of the week because of uncertainty over whether the central bank will cut interest rates on Thursday following a reduction in bank reserve requirements.

About 60 billion pesos ($ billion) flows back into the financial system after the central bank's 2 percentage point cut in regular reserve requirements took effect on Friday.

The move was seen aimed at ensuring market liquidity amid the deepening global credit crisis, dealers said.

Banks are now reviewing where best to put the fresh liquidity, although there was still a preference for putting money into the more liquid short end of the market, traders said on Monday.

"Investors are a bit cautious where they will put their money right now," a trader from a local bank said. "Investors are on a wait-and-see."

Some traders argue the cut in reserve requirements will provide enough of a boost to the economy that the central bank can stay its hand on interest rates for now.

But others suggest a rate cut was needed to shore up a slowing economy, especially given rapidly weakening advanced economies. A fall in the inflation rate from a 17-year high also suggests room to ease policy further, they say.

The central bank kept rates steady in October after hiking them 100 basis points over three meetings to tackle quickening inflation. The overnight rate stands at 6 percent. The government plans to sell 6 billion pesos ($121 million) worth of 10-year Treasury bonds at an auction on Tuesday. Traders expect the bond to fetch an average rate of 9 percent, slightly higher than yields quoted in the secondary market.

Average best bids and done deals in the secondary market*:

Nov 17 Nov 10 Nov 17 Nov 10
(in percent)
three-month 6.4231 6.4654 6.2500 6.2500
six-month 7.0288 6.8827 6.5552 6.7000
one-year 7.2008 7.1750 6.8944 7.0500
two-year 7.4846 7.4562 6.9257 7.3000
three-year 7.7346 7.5827 7.5000 7.4750
four-year 8.0000 7.8077 7.7500 7.6850
five-year 8.1346 7.9988 7.8750 7.9000
seven-year 8.3135 8.3212 8.0000 8.2000
10-year 8.8365 8.6692 8.5000 8.5000
20-year 13.1346 13.1346 13.0000 13.0000
25-year 13.6192 13.6269 13.5000 13.5000
*Values based on fixing by the Philippine Dealing and

Exchange Corp (PDEX) as of 11:17 a.m..

($1=49.65 pesos)

(Reporting by Karen Lema; Editing by Neil Fullick) Keywords: MARKETS PHILIPPINES/DEBT (karen.lema@thomsonreuters.com; Reuters Messaging: karen.lema.reuters.com@reuters.net; +632 841 8938)

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