While there was subdued demand for longer-term debt securities owing to inflation worries, the Marcos government still managed to raise ₱35 billion as planned through the sale of two government bonds.

During the sale of the 10-year Treasury bonds (T-bonds) on Tuesday, Oct. 7, the Bureau of the Treasury (BTr) fully awarded its ₱20-billion offering. Total bids reached ₱43.5 billion, more than double the amount offered.

Demand was weaker than the ₱77.2 billion tendered during the previous 10-year bond auction on Sept. 16.

With a remaining maturity of nine years and six months, the bonds were awarded at an average rate of 6.043 percent.

This was 2.4 basis points (bps) higher than the 6.019 percent rate for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.

It was also 13.6 bps higher than the 5.907 percent recorded in the same auction last month. However, it remained above the central bank’s key policy rate of five percent.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said the higher borrowing costs come “amid some market hesitancy on long-end tenors to lock in with some market risk to manage, compared to shorter-dated tenors amid relatively higher long-end bond yields in some developed countries worldwide recently.”

The lower demand might be due to concerns that the US Federal Reserve could become more aggressive in cutting interest rates, as suggested by President Donald Trump, potentially reigniting long-term inflation pressures.

Meanwhile, during the sale of the three-year T-bonds, the BTr fully awarded its ₱15-billion offering. Total bids reached ₱34.4 billion, more than double the amount offered.

Demand was weaker than the ₱37.9 billion tendered during the previous three-year bond auction on Sept. 23.

With a remaining maturity of two years and six months, the bonds were awarded at an average rate of 5.698 percent.

This was slightly lower than the 5.705 percent rate for comparable corporate bonds in the secondary market, based on the PHP BVAL Service Reference Rate.

However, it was 9.3 bps higher than the 5.605 percent recorded in the same auction last month.

For the fourth quarter of the year, the government plans to borrow ₱262 billion in Treasury bills (T-bills), which will comprise 60 percent of the total fourth-quarter debt offerings.

Meanwhile, T-bonds will account for the remaining 40 percent, with planned borrowings of ₱175 billion. This is ₱190 billion, or 52.1 percent, lower than the third quarter’s ₱365 billion, continuing the decline seen in the previous quarter.

Planned domestic borrowings for the last quarter represent 17.1 percent of the government’s total planned borrowing of ₱2.55 trillion for 2025.

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.