Demand for government securities (GS) improved at the start of the second quarter, but the Marcos Jr. administration still struggled to raise its planned ₱27 billion in short-term debt papers, as overall interest costs remained elevated amid anticipation of a policy hike in April.

During the latest treasury bill (T-bill) auction on Monday, April 6, the Bureau of the Treasury (BTr) raised ₱22.8 billion, ₱4.2 billion short of its goal. This latest result continued a trend of the government facing difficulty in borrowing its full planned amount, a challenge also seen in the March 23 auction.

This marks the fourth consecutive T-bill auction in which the government failed to raise its planned debt, largely influenced by the flare-up of military hostilities in the Middle East.

Total bids for the auction reached ₱50.2 billion, approximately 1.86 times the amount of debt papers offered. This represents a significant increase in demand compared to the ₱36.7 billion in tenders recorded during the March 23 auction.

The BTr fully awarded the ₱9-billion offering for benchmark 91-day T-bills. Total tenders for the shortest tenor reached ₱26.7 billion. Notably, the average rate for this tenor fell to 4.985 percent, down from the 5.004 percent recorded on March 23.

For 182-day debt papers, the BTr also raised the full ₱9 billion offered. Bids reached ₱16.6 billion, fetching an average rate of 5.08 percent, which is 4.8 basis points (bps) higher than the March 23 auction’s 5.032 percent.

Lastly, the BTr awarded only ₱4.8 billion of its ₱9-billion borrowing plan through 364-day IOUs. Demand for this tenor reached ₱7 billion, with the average rate increasing by 3.8 bps to 5.204 percent from 5.166 percent in the previous auction.

PHP Bloomberg Valuation (PHP BVAL) reference rates for April 6 showed that 91-, 182-, and 364-day T-bills were quoted at 4.99 percent, 5.125 percent, and 5.18 percent, respectively.

Unlike in previous weeks, the average auction rates for the 91- and 182-day tenors were lower than these secondary market rates, while the 364-day average rate remained higher. Average rates across the board remained significantly above the 4.25-percent benchmark rate.

According to Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort, the continued increase in yields reflects the market’s heightened expectations of the Bangko Sentral ng Pilipinas (BSP) hiking the benchmark rate this April. The BSP’s Monetary Board (MB) will hold its next policy meeting on April 23.

Ricafort said this policy tightening could be triggered if oil-shocked inflation overshoots the four-percent tolerance band set by the BSP.

For the second quarter of 2025, the government intends to borrow ₱364 billion in T-bills, which is 12.3 percent higher than the ₱324 billion it planned to borrow in the first quarter of 2026. T-bills will comprise 46.4 percent of the total second-quarter domestic debt offerings.

Meanwhile, treasury bonds (T-bonds), or long-term government debt, will account for the remaining 53.6 percent, with planned borrowings of ₱420 billion. This is ₱80 billion lower than the first quarter’s ₱500 billion, representing a 16-percent drop.

Planned domestic borrowings for the second quarter represent 29.3 percent of the government’s total planned borrowing in 2026 of ₱2.68 trillion.