The Marcos government successfully raised ₱35 billion as planned through the sale of two government bonds, with mixed investor demand as risks tied to longer-dated securities dampened appetite while the shorter-tenored paper drew stronger interest.

During the sale of the seven-year Treasury bonds (T-bonds) on Tuesday, Oct. 21, the Bureau of the Treasury (BTr) fully awarded its ₱20-billion offering. Total bids reached ₱55.5 billion, nearly three times the amount offered.

Demand was weaker than the ₱66.7 billion tendered during the previous seven-year bond auction on Sept. 2.

With a remaining maturity of six years and 10 months, the bonds were awarded at an average rate of 5.798 percent.

This was 1.3 basis points (bps) lower than the 5.811 percent rate for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.

It was also 14.1 bps lower than the 5.939 percent recorded in the same auction last month. It was also above the central bank’s key policy rate of 4.75 percent.

Costs declined for the seven-year bond as demand for local government securities remained strong according to Michael Ricafort, chief economist at Rizal Commercial Banking Corp.  

Ricafort added that the drop came amid higher prices and lower yields in both the Treasury bill and bond markets, driven by expectations that Philippine sovereign bonds could soon be included in the JPMorgan Global Emerging Market Bond Index.

Lending rates also declined as investors priced in another possible 25-basis-point rate cut by the Bangko Sentral ng Pilipinas (BSP) at its next policy meeting on December 11, prompting them to secure yields ahead of further rate easing.

Meanwhile, during the sale of the 25-year T-bonds, the BTr fully awarded its ₱15-billion offering. Total bids reached ₱18.6 billion, higher than the amount offered.

Demand was weaker than the ₱35.3 billion tendered during the previous 25-year bond auction on Aug. 27.

With a remaining maturity of 24 years and three months, the bonds were awarded at an average rate of 6.510 percent.

This was 11 bps higher than the 6.400 percent rate for comparable corporate bonds in the secondary market, based on the PHP BVAL Service Reference Rate. It was also 13.6 bps higher than the 6.374 percent recorded in the same auction last month.

Ricafort said higher borrowing costs for the 25-year bond come “amid some market hesitancy on long-end tenors to lock in with some market risk to manage, compared to shorter-dated tenors.” 

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.