Philippine three-year bonds fell on Monday, driving up yields by the most in more than a month, after the central bank signaled it may raise borrowing costs this week.

The Bangko Sentral ng Pilipinas (BSP) has a “number of instruments,” including the policy rate and the reserve requirement for banks to deal with inflation, Governor Amando Tetangco Jr. said on Sunday. Ten of 16 economists surveyed by Bloomberg predict the overnight benchmark rate will be increased 0.25 percentage point to 4.75 percent on Thursday, while the rest forecast no change.

“The statements send a clear message that borrowing costs are still on their way up,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. “They will use other tools once they’re finished with the rate hikes, or if inflation rallies above 5 percent.”

The yield on the 6.25-percent bond due January 2014 rose 11 basis points, or 0.11 percentage point, to 4.85 percent, according to Tradition Financial Services. That’s the biggest increase since May 6. The peso fell 0.1 percent to 43.335 per dollar, according to Tullett Prebon Plc.

“The strategy is to make sure we’re always ahead of the curve in dealing with inflation,” Finance Secretary Cesar Purisima said on Sunday, adding the central bank will consider all policy tools. Purisima is a member of the BSP’s Monetary Board.

The monetary authority, which raised the benchmark rate by a quarter of a percentage point at meetings in March and May to 4.5 percent, will assess the impact of the two interest-rate increases, Tetangco said.

The Bureau of Treasury rejected bids for 182-day bills and allowed three-month and one-year borrowing costs to rise, auction results showed on Monday. (See story on B4.)

“There may be some uncertainty in the market” on this week’s rate decision, Treasurer Roberto Tan told reporters after the auction.

Meanwhile, Treasurer Eduardo Mendiola said six banks have been “shortlisted” to help arrange the planned bond exchange. He declined to identify the banks.