The Bureau of the Treasury (BTr) partially awarded the reissued 20-year treasury bonds on Tuesday, when it saw relatively weaker demand and a higher average rate.
The auction for the securities, with a remaining term of 13 years and 8 months, was only 1.1 times oversubscribed, with total tenders reaching P34.469 billion.
The government’s previous auctions in recent weeks saw demand usually two to three times higher than the offer.
The BTr opted for partial rejection to raise P19.758 billion out of the P30 billion offering.
This brings the total outstanding volume for the reissued series to P184.1 billion.
The Treasury bonds fetched an average yield of 6.473 percent.
This is higher than the previous average rate of 6.103 percent, as well as the 6.409 percent rate provided by the Bloomberg Valuation Service for the 15-year tenor.
Had a full award been made, the rate would have reached 6.536 percent.
John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the relatively weak demand for the reissued bonds and the higher average rate can be attributed to several factors.
“First, market participants are showing caution amid heightened global uncertainty, including ongoing geopolitical tensions and trade policy shifts,” Rivera said.
“Second, the upward pressure on long-term yields reflects expectations that inflation may pick up slightly in the second half of the year, delaying aggressive monetary easing by central banks,” he added.
Rivera said that locally, the widening of the fiscal deficit and continued government borrowing may also be contributing to investor risk premiums.
“Finally, the longer tenor of nearly 14 years naturally commands higher yields to compensate for duration risk, especially with the curve steepening slightly in recent auctions,” Rivera said.
Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said the higher treasury bond rate follows the recent increase in US Treasury bond yields, which was triggered by Moody’s downgrade of the US credit rating to Aa1 from Aaa.
“Offsetting positive factors: BSP Governor Remolona recently signaled two -0.25 BSP rate cuts for the rest of 2025 as fundamentally supported by easing/benign inflation; possible RRR cut in 2026; the peso exchange rate recently appreciated versus the US dollar to the best in nearly two years and global crude oil prices eased to among the lowest in more than four years or since April 2021.” Both of which would reduce importation costs and overall inflation, which could support further monetary easing or rate cuts for the coming months, Ricafort said.
