The Marcos administration has successfully borrowed ₱30 billion from the sale of long-term debt securities, but borrowing costs climbed amid dampened creditor interest due to elevated US bond yields following Moody’s downgrade of its credit rating.

At Tuesday’s auction, the Bureau of the Treasury (BTr) raised and awarded ₱30 billion through the auction of 10-year bonds. Bids totaled ₱109.5 billion, nearly four times the amount offered.

These long-term interest rates slightly declined on a monthly basis, supported by strong investor demand. It followed the previous auction’s higher total bids of ₱197.3 billion.

With a remaining maturity of nine years and 11 months, the bonds were awarded at an average rate of 6.226 percent. This was higher by 3.4 basis points (nps) than the 6.192 percent rate for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.

However, it was slightly lower than the 6.286 percent recorded in the previous auction on April 15.

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said that the higher interest rates come amidst recent fluctuations, with the current yield higher than the lows of the past month and approaching highs not seen in nearly 9.5 months.

He said these movements follow elevated US Treasury bond yields triggered by Moody's downgrade of the US credit rating to Aa1 from Aaa last week. This came alongside US President Donald Trump’s proposed economic measures, which pushed the 10-year US Treasury yield to 4.46 percent—its highest level in nearly three months.

This trend could further result in elevated borrowing costs for governments, corporations, and other borrowers, as their debt is priced at a premium relative to US Treasury yields.

The impact of this development could be offset by local factors such as the Bangko Sentral ng Pilipinas’ (BSP) more dovish signals last week on a possible additional 75 bps cut for the rest of the year.

Factored into this is the sharp drop in inflation to a more than five-year low, giving the BSP more room to lower interest rates. This comes alongside a stronger peso, which has recently been among the best-performing currencies against the greenback over the past eight months.

The Philippines borrows more locally, through treasury bills and bonds, than from foreign sources. This borrowing strategy leverages domestic banks and creditors who are flush with cash, while mitigating exposure to foreign exchange (forex) risks and volatility.

The government’s outstanding debt was equivalent to 62 percent of the country’s gross domestic product (GDP) in the first quarter, its highest level in two years. It climbed from 60.7 percent at the end of 2024.

Specifically, domestic debt stood at 42.3 percent of GDP, while foreign debt had a GDP ratio of 19.7 percent.

This came as the Marcos administration hiked its borrowings to advance its spending program, pushing the debt ratio further above the global benchmark.