The national government has borrowed only ₱19.8 billion from local lenders—well below its ₱30-billion program for Tuesday's treasury bond offering—after rejecting bids with higher interest costs amid weaker demand from investors.

The Bureau of the Treasury (BTr) awarded only less than two-thirds of the targeted proceeds through the sale of 15-year bonds. Bids totaled ₱34.5 billion, just slightly higher than planned borrowing.

The sale saw a slight increase in interest rates and lower demand from domestic creditors.

With a remaining maturity of 13 years and eight months, the bonds were awarded at an average rate of 6.473 percent. This was higher by 6.4 basis points (bps) than the 6.409-percent rate for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael L. Ricafort said that the higher interest rates followed the recent upticks in the interest rates of United States (US) treasury bond yields, which was triggered by the downgraded US credit ratings by Moody's.

Ricafort noted that this development also came alongside announcements regarding tax cuts and economic stimulus by US President Donald Trump.

Raising US treasury yield may also potentially raise borrowing and financing costs globally as governments, corporations, and other major borrowers adjust to spreads above comparable US treasury yields, he noted.

Some of the offsetting factors, meanwhile, is the central bank’s recent signal of possible two quarter-point rate cuts for the rest of 2025. This is supported by easing inflation and a possible reserve requirement ratio (RRR) cut in 2026.

Additionally, the peso has strengthened against the US dollar to its best level in nearly two years, and global crude oil prices have fallen to their lowest in over four years. These factors help lower import costs and overall inflation, potentially allowing for more monetary easing and rate cuts in the coming months, Ricafort said.

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.