The national government refused to take on new debt at a bond auction on Tuesday, May 19, telling local banks that the interest rates they were asking for were simply too high.

During the latest Treasury bond (T-bond) auction, the Bureau of the Treasury canceled the ₱30 billion sale of the reissued debt papers after investors sought yields as high as 8.125 percent

National Treasurer Sharon P. Almanza told Manila Bulletin on Tuesday, May 19, that the government rejected all bids because the “rates are too high.”

The Treasury’s auction committee decided to fully reject bids for the reissued seven-year IOUs, which carry a remaining term of seven years and three months.

Total tenders reached ₱33.7 billion, higher than the government’s ₱30 billion program.

Had the BTr opted to award the bids, the average rate for the debt papers, specifically the FXTN 10-71 series, would have reached 7.915 percent.

Investor demands during the auction were varied, with bid rates ranging from a low of 7.625 percent to a high of 8.125 percent.

These yields were significantly higher than prevailing market benchmarks. As of May 19, the seven-year BVAL rate was quoted at 7.604 percent, while the specific benchmark for Series 10-71 stood at 7.612 percent.

To date, the bond series has an outstanding volume of ₱199.5 billion.

Rizal Commercial Banking Corp. Michael Ricafort said the demand for higher borrowing costs reflects concerns over rising inflation, elevated oil prices, peso weakness, and political uncertainty.

Ricafort also said investor sentiment was weighed down by elevated global oil prices, higher United States (US) Treasury yields, and heightened expectations of further interest rate hikes from the Bangko Sentral ng Pilipinas (BSP), which recently adjusted the policy rate to 4.5 percent.

He added that the peso’s recent slump to historic lows against the US dollar, combined with the factors cited above, fueled inflation concerns and pushed borrowing costs higher.

The government plans to borrow ₱364 billion via T-bills in the second quarter of 2026, higher than the ₱324 billion eyed in the previous quarter. T-bills will account for 46.4 percent of the ₱784-billion total domestic borrowing program from April to June.

Meanwhile, the government has scaled back its long-term borrowing plans, with Treasury bond offerings set at ₱420 billion, down from the previous quarter’s ₱500 billion.

In total, the domestic borrowing plan for the second quarter accounts for nearly 30 percent of the government’s ₱2.68 trillion annual financing requirement.