The national government fully awarded its offer of seven-year Treasury bonds on Tuesday, April 21, though appetite for the debt cooled as investors braced for the potential interest rate hike by the central bank.

The Bureau of the Treasury raised the programmed ₱20 billion from the auction of the notes, which carry a remaining term of six years and 11 months.

Total tenders reached ₱26.5 billion, or 1.3 times oversubscribed, but demand was significantly lower than the ₱38.506 billion in bids recorded during the previous auction for the same tenor on March 10.

Lenders demanded higher premiums to hold the government debt, with the average rate on the seven-year paper climbing to 6.643 percent. That is 10.8 basis points higher than the comparable 6.535 percent yield for the same maturity on the PHP Bloomberg Valuation Service Reference Rate.

The uptick in yields reflects a cautious shift in market sentiment amid persistent domestic price pressures.

The rise in borrowing costs is primarily driven by market hesitancy fueled by elevated geopolitical risks, specifically the ongoing conflict in the Middle East, according to Michael Ricafort, chief economist at Rizal Commercial Banking Corp.

Ricafort noted that investors are also positioning themselves ahead of an anticipated 25-basis-point interest rate increase by the Bangko Sentral ng Pilipinas (BSP). The central bank is expected to act as inflation is likely to accelerate further in April, prompting a more hawkish stance to anchor price expectations.

The latest auction results come as the Marcos administration recalibrates its borrowing strategy for the second quarter of 2026. The government has increased its reliance on short-dated Treasury bills, targeting ₱364 billion in issuances for the period. That is a 12.3 percent increase from the ₱324 billion raised in the first quarter. These short-term instruments now account for 46.4 percent of the quarter’s ₱784 billion total domestic borrowing plan.

In contrast, the Treasury has scaled back its long-term financing goals. Treasury bond offerings for the second quarter are set at ₱420 billion, a 16 percent decline from the ₱500 billion sought in the previous three-month period.

This quarterly domestic program represents nearly 30 percent of the government’s ₱2.68 trillion total annual financing requirement for 2026, as the state seeks to manage its debt maturity profile amid a volatile interest rate environment.