The Marcos administration fell short of its borrowing target from short-term debt papers, as interest rates remained elevated despite the Bangko Sentral ng Pilipinas’ (BSP) recent rate cut and expectations of another, amid escalating tensions in the Middle East.

The national government raised only ₱24.6 billion on Monday, June 23, through the sale of three-month, six-month, and one-year debt securities, which fell short of the ₱25 billion offered.

The Bureau of the Treasury (BTr) made a partial award after receiving total bids of ₱64.5 billion, which is just over double the amount offered.

This week’s total bids continued to decline from the ₱74.2 billion recorded in the similar auction previously, which also saw a drop in demand.

For the 91-day Treasury bills (T-bills, the government awarded only ₱4.4 billion, just more than half of the ₱8 billion offered. Total tenders reached ₱20.5 billion. The average rate was 5.530 percent, 7.1 basis points (bps) higher than the previous week’s 5.459 percent.

Similar to the trend seen last week, the BTr awarded ₱11.2 billion for 182-day debt papers, exceeding the ₱8 billion offered amount. Bids reached ₱25.1 billion. It fetched an average rate of 5.557 percent, 3.4 bps higher than last week’s 5.523 percent.

Lastly, the BTr now borrowed the planned ₱9 billion through 364-day IOUs. Demand reached ₱19.9 billion. The average rate inched down slightly to 5.655 percent from 5.657 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 5.471 percent, 5.621 percent, and 5.684 percent, respectively.

The benchmark rates for the three-month and six-month government securities increased from the previous week. Meanwhile, the benchmark rate for the one-year securities declined.

Average rates across the board were higher than the latest key borrowing costs of 5.25 percent.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said the interest rates for the short-term debt securities inched up for a second straight week despite the BSP’s most recent 25 bps rate cut to 5.25 percent. He said this key interest rate was the lowest in two-and-a-half years since November 2022.

These higher rates also came after the “continued dovish signals” on the likelihood of another quarter-point cut by year-end due to the escalating tensions between Israel and Iran, US strikes on Iranian nuclear sites, which led to higher global oil prices.

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.