Interest rates on long-term government bonds climbed as investor appetite weakened due to concerns over US inflation risks and fewer US Federal Reserve rate cuts despite recent domestic policy boosts.

On Tuesday, Feb. 25, the Bureau of the Treasury (BTr) successfully raised ₱25 billion through the auction of reissued 20-year bonds. Bids totaled ₱39.1 billion, 1.5 times higher than the amount offered.

The treasury bonds (T-bonds), with a remaining maturity of 19 years and three months, were awarded at an average rate of 6.376 percent. This is 2.6 points higher than the 6.35 percent rate for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.

It also increased from the 20-year PHP BVAL yield on Feb. 24, which stood at 6.349 percent.

According to Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), the yield increase from the last comparable auction in November 2024 followed the trend of rising PHP BVAL rates recently.

Ricafort attributed these changes to higher US Treasury yields in recent months, which was partly influenced by the “Trump factor” or premium.

Interest rates on the 20-year debt securities were higher partly because investor demand was lower compared to shorter-term bonds in recent weeks.

As per Ricafort, this implies investors have a “lower appetite” for long-term debt paper due to concerns about Trump’s protectionist policies, which could raise US inflation and lead to fewer interest rate cuts by the Fed.

This is despite the offsetting factors of the recently announced reserve requirement ratio (RRR) cuts across the board and the country’s exit from the global money-laundering watchlist.

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.