The government on Monday, June 2, borrowed ₱28.6 billion—exceeding its ₱25-billion offer—through short-term debt papers as domestic lenders flocked to the sale, eager to lock in relatively higher interest rates ahead of an expected decline in the coming months.

At the latest treasury bills auction, the Bureau of the Treasury (BTr) awarded more than its planned borrowing, with total bids reaching ₱116.3 billion—nearly five times the amount offered.

This week’s total bids were significantly higher than the ₱84.3 billion in tenders from the previous T-bill auction on May 26.

The government fully awarded the ₱8-billion offering for 91-day T-bills. Total tenders reached ₱31.7 billion. The average rate was 5.452 percent, 1.6 basis points (bps) lower than the previous week’s 5.468-percent rate.

For 182-day debt papers, the BTr also raised ₱8 billion, fully awarding the offered amount. Bids reached ₱41.7 billion. It fetched an average rate of 5.565 percent, slightly higher by 1.4 bps than last week’s 5.551 percent.

Notably, the BTr borrowed more than the planned ₱9 billion through 364-day IOUs, raising ₱12.6 billion. Demand reached ₱43 billion. The average rate dropped slightly by 1.4 percent to 5.68 from 5.694 percent in the previous auction.

Prior to Monday’s auction, PHP Bloomberg Valuation (PHP BVAL) Reference Rates showed that the 91-, 182-, and 364-day T-bills were quoted at 5.433 percent, 5.597 percent, and 5.725 percent, respectively. Rates across the board slightly dipped from last week’s benchmark rate.

Notably, only the three-month IOUs were higher than the official benchmark. The six-month and one-year debt papers, meanwhile, were lower than the benchmark rate.

The average rate for three-month T-bills clocked in lower than the key borrowing costs of 5.5 percent. Meanwhile, longer-dated IOUs stood higher than the benchmark.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said that the higher demand from short-term debt papers could be attributed to the investors’ move of locking in relatively higher interest rates “before they go down in the coming months.”

He also said that reduced interest rates for T-bills reflected a modest decline in comparable short-term PHP BVAL yields, a movement that comes ahead of the data on May inflation. The market widely expects further easing in inflation from 1.4 percent in April.

Ricafort noted that a further drop in inflation could bolster the case for a possible quarter-point rate cut during the Bangko Sentral ng Pilipinas' (BSP) next policy meeting on June 19, which is in line with recent signals from BSP Governor Eli M. Remolona Jr.—the likelihood of two more cuts for the rest of 2025.

The Philippines borrows more locally—through treasury bills and bonds—than from foreign sources. This borrowing strategy takes advantage of domestic banks and creditors who are awash in cash, while veering away from foreign exchange (forex) risks and volatility.

The national 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.