The national government fully awarded its ₱30 billion offering of reissued five-year Treasury bonds on Tuesday, May 12, even as investors demanded higher yields amid persistent inflationary pressures and weakening local currency.

The Bureau of the Treasury opted for a full award of the Series 7-71 securities despite a relatively thin coverage ratio, signaling the Marcos administration’s commitment to meeting its domestic funding targets.

Total tenders reached ₱38.4 billion, approximately 1.3 times the amount on offer.

The average rate for the reissued bonds, which have a remaining life of four years and eight months, surged to 7.249 percent. This represents a significant jump from the 6.328 percent recorded during the previous comparable auction on April 14.

The result also cleared 23.8 basis points higher than the 7.0106 percent five-year PHP BVAL secondary market benchmark recorded on May 11, indicating that the government had to pay a premium to entice lenders.

Yields submitted by participating banks ranged from a low of 7.000 percent to a high of 7.450 percent. This upward shift in the yield curve places the government’s borrowing costs well above the Bangko Sentral ng Pilipinas’ current 4.5 percent policy rate, as markets price in a “higher-for-longer” interest rate environment. Following Tuesday’s sale, the total outstanding volume for this specific bond series reached ₱245 billion.

Market analysts noted that the auction results reflect a defensive stance among local institutional investors. Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said domestic lenders appear to be waiting for yields to peak before committing to substantial long-term positions. This hesitation is driven by hawkish signals from monetary authorities and the potential for consumer prices to remain volatile.

Further weighing on investor sentiment is the recent depreciation of the Philippine peso against the US dollar. A weaker currency threatens to exacerbate imported inflation, complicating the central bank’s efforts to bring price growth back within its target range.

The Treasury’s decision to accept higher rates comes as the government recalibrates its borrowing strategy for the second quarter of 2026. National Treasurer officials have shifted the mix of domestic debt toward shorter-dated maturities. The government plans to raise ₱364 billion via Treasury bills between April and June, up from ₱324 billion in the first quarter. This shorter-term debt now accounts for 46.4 percent of the period’s ₱784 billion domestic borrowing program.

Conversely, the government has trimmed its long-term financing goals, reducing Treasury bond offerings to ₱420 billion from the ₱500 billion targeted in the previous quarter. The second-quarter domestic program represents roughly 30 percent of the administration’s ₱2.68 trillion total financing requirement for the year.