The bomb went off as the bus was travelling through Matalam town on the southern island of Mindanao [AFP]

At least ten people have been killed after a bomb ripped through a passenger bus in the southern Philippines, the military said.

The bomb went off as the bus was travelling through Matalam town on the southern island of Mindanao on Thursday.

Gil Meneses, the local police chief superintendent, said that more than 50 passengers were onboard when the bomb went off in an overhead compartment.

The force of the blast was so strong it decapitated two of the victims, he said.

Al Jazeera's Jamela Alindogan in Manila said:"In the last few months the area in the south of Philippines has been particularly quiet, but this incident comes at a sensitive time ahead of next weeks local village elections.

"Local village elections are particularly bloody but this attack is similar to those who have been reported in the past where bus companies who refuse to pay big bribes to extortion groups. " 

There was no immediate claim of responsibility for the bombing, but the southern Philippinnes is home to Muslim separatists, who have been fighting for an independent homeland for decades, as well as criminal gangs.

"The bus company has long been receiving extortion letters from armed groups operating in the region," Lieutenant Colonel Randolph Cabangbang, a regional military spokesman, said.

Bomb experts have been dispatched to the site to determine the type of explosive used, he said.

The bomb was apparently hidden inside a bag placed in a luggage compartment at the back of the bus, and exploded just after a group of men who were suspected to have planted it got off the vehicle, Cabangdang said.

Bus driver Arlan Tadeo, 38, who was unharmed in the incident, said there were 60 passengers on board when the explosion occurred.

"I saw in the rear-view mirror shattered blood-stained windows," he said.

In April last year, two homemade bombs exploded hours apart on one bus, wounding the conductor and five passengers.

A bomb exploded at a Cotabato city bus terminal in February the same year, wounding two people.