Elevated borrowing costs, fueled by expectations of further monetary tightening this month, prevented the Marcos administration from raising its full target amount at the latest Treasury bill (T-bill) auction.

During the auction on Monday, June 8, the Bureau of the Treasury (BTr) raised ₱56 billion, falling slightly short of its ₱60 billion total offering. Total bids reached ₱82 billion—approximately 1.4 times the amount offered—surpassing the ₱70.5 billion in demand recorded on June 1.

The BTr awarded ₱26 billion in 91-day T-bills, missing the ₱30 billion target. Total tenders for this tenor reached ₱35.1 billion, with the average rate rising to 5.188 percent from 5.143 percent the previous week.

For the 182-day debt papers, the BTr raised the full ₱20 billion offer. Bids reached ₱29.6 billion, while the average rate climbed to 5.679 percent, up from 5.624 percent a week earlier.

Meanwhile, the Treasury saw continued strong demand for 364-day IOUs, awarding the full ₱10 billion offer as tenders reached ₱17.2 billion. The average rate for this maturity declined slightly to 6.267 percent from 6.269 percent in the previous auction.

Monday's PHP Bloomberg Valuation (PHP BVAL) Reference Rates showed the 91-, 182-, and 364-day T-bills quoted at 4.956 percent, 5.365 percent, and 6.064 percent, respectively. Auction yields continued to settle above these secondary market benchmarks.

The yield increases came despite inflation slowing more than expected, though the latest 6.8-percent headline inflation rate remains well above the Bangko Sentral ng Pilipinas’ (BSP) 2- to 4-percent target range.

Rizal Commercial Banking Corp. chief economist Michael Ricafort noted that the rising yields followed the May inflation data, which heightened market expectations of further monetary policy tightening at the upcoming June 18 policy meeting. Concerns over the peso’s weakness against the United States (US) dollar—which could raise import costs and stoke inflation—also pushed yields higher.

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

Conversely, the government has scaled back its long-term borrowing plans, reducing Treasury bond offerings to ₱420 billion 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.