Gov’t holds back on T-bond issuance to curb interest rate

Treasury Bonds auction results on May 27, 2025

MANILA, Philippines — The government was able to raise P19.8 billion from the partial awarding of reissued 20-year bonds auctioned on Tuesday.

The Bureau of the Treasury (BTr) said that the reissued bonds – first launched in 2020 – fetched an average interest rate of 6.473 percent.

These securities now have 13 years and 8 months remaining before maturity.

Investor demand slightly exceeded the offer, with total bids reaching P34.5 billion, making the auction 1.1 times oversubscribed.

Despite the interest, the BTR decided to cap the awarded amount, citing yield considerations.

This latest sale brings the total outstanding volume of this bond series to P184.1 billion.

Sought for comment, RCBC chief economist Michael Ricafort told the Inquirer that the government bond yield, or the interest it pays to borrowers, was a bit higher this time compared with recent benchmarks.

He said this increase was partly because U.S. Treasury bond yields have gone up lately.

This happened after Moody’s had lowered the U.S. credit rating and likewise because of plans for new tax cuts and economic stimulus in the U.S.

READ: The US credit ratings downgrade–should I worry?

When U.S. bond yields rise, it usually means borrowing costs rise for many countries, including the Philippines.

Fewer bidders

Ricafort also noted that fewer investors had bid on the government bonds this time compared with previous auctions, which contributed to the slightly higher interest rate. Some bids asking for higher yields were rejected to keep costs down.

“The 15-year T-bond auction yield were also slightly higher on relatively lower total bids or demand compared to previous Treasury bond offerings in recent weeks, at P34.469 billion; but still slightly higher versus the total offering of P30 billion, P19.758 billion of which was partially awarded, with some high bid yields rejected,” Ricafort said.

On the bright side, he said there were positive signs for the local economy.

He said that Bangko Sentral ng Pilipinas Governor Eli Remolona had recently hinted at lowering interest rates twice before the end of the year because inflation was easing.

READ: Bangko Sentral ng Pilipinas sees at least two more rate cuts in 2025

Also, the Philippine peso has strengthened against the U.S. dollar, and global oil prices have dropped to their lowest levels in over four years.

Both factors help reduce costs for imports and overall inflation, which may allow the central bank to cut rates further in the coming months.