Strong demand for government long-term debt papers drove yields lower, fueled by expectations of central bank interest rate cuts and easing US Treasury yields.

On Tuesday, Feb. 18, the Bureau of the Treasury (BTr) successfully raised ₱30 billion through the auction of reissued 10-year bonds. Bids totaled ₱60.2 billion, more than double the amount offered.

The bonds, with a remaining maturity of eight years and 11 months, were awarded at an average rate of 6.118 percent. This is nine basis points lower than the 6.127 percent rate for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.

The rate also improved slightly from the 10-year PHP BVAL yield of 6.13 percent on February 17.

According to Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), the lower yield follows a decrease in the 10-year US Treasury yield to 4.52 percent. He attributed this decline to policies of the Trump 2.0 administration, which focus on lowering yields.

Ricafort also noted that the central bank's recent decision to hold rates steady suggests potential future cuts. Lower global crude oil prices, following peace talks in Ukraine, could further ease local inflation.

Additionally, long-term debt yields fell after Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. hinted at a potential reserve requirement ratio (RRR) cut by April 3, 2025. This could inject ₱330 billion into the banking system, potentially boosting loans, bond investments, and other asset purchases.

The Philippines favors domestic borrowing—through treasury bills and bonds—over foreign borrowing. This strategy leverages the ample liquidity of domestic banks and creditors while mitigating foreign exchange risks and volatility.