Philippine debt yields were steady in light trade on Monday ahead of the expected release this week of budget data for the first two months of the year and the government's second-quarter borrowing program.

Investors were also waiting for Monday's regular T-bill auction worth P7 billion ($145 million) at 0500 GMT which they expected to set direction for the rest of the week.

But most traders said T-bill auction rates were likely to be 5 to 10 basis points lower than the previous successful sale on March 9 with the market largely liquid, creating less pressure for the government to accept high bids.

"With very little demand and yields unattractive, it's prudent for the market to wait and see before taking an active position," said a debt trader from a big local bank.

"But the general direction is still for lower rates, though it may be a slow and steady decline," the trader said.

The trader said most banks have opted to place their money in the central bank's short-term special deposit account windows, which offer better yields than T-bills, contributing to muted demand for the short-term Treasury papers.

The best bid for the benchmark 91-day T-bill was 4.5637 percent in the secondary market, slightly higher than 4.5554 percent on Friday. It was also above the average rate of 4.394 percent at the last auction on March 9.

The government will release this week data on its fiscal shortfall in January and February, but Finance Secretary Margarito Teves had said earlier this month the figures looked "tough," with revenues likely to struggle.

Manila has raised its budget deficit target this year to P177.2 billion from a previous goal of P102 billion to allow for more spending to shore up the local economy amid the global downturn.

But the higher fiscal shortfall goal would entail more debt issuance, and the market is waiting for the Bureau of Treasury to disclose how big its borrowings would be in the second quarter.

"A grossly higher second-quarter borrowing program could  trigger some selling, pushing up yields," one trader from a local bank said.

Transactions in the secondary debt market by late morning on Monday were about P1.45 billion against trades for the whole of Friday of at least P10.5 billion.