Gov't issues P20 billion worth of Treasury bonds

The Marcos administration raised %u20B120 billion from long-term debt sales, but at higher interest rates, as investors anticipate an upcoming retail treasury bond offering that could impact market demand, according to a report by Manila Bulletin.

During the sale of three-year treasury bonds (T-bonds) on Tuesday, July 22, the Bureau of the Treasury (BTr) fully awarded its P20-billion offering, with total bids reaching P44.8 billion, more than twice the amount offered.

Demand was stronger than the %u20B140.7-billion tenders during the previous three-year bond auction on June 25.

With a remaining maturity of two years and nine months, the bonds were awarded at an average rate of 5.817 percent. This was 2.4 basis points (bps) lower than the 5.841-percent rate for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.

However, it was 5.7 bps higher than the 5.76 percent recorded in the same auction last month.

According to Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), the higher interest costs came ahead of the retail treasury bond (RTB) offering as early as August, which “could increase the supply of Treasury bonds in the market and could siphon off some excess liquidity in the market.”

He noted, however, that this would be offset by the jumbo maturing five-year RTB worth P516 billion on August 12 that “would look for reinvestment opportunities since these were set near record low of 2.625 percent five years ago and would be reinvested possibly at more than twice the yield at around six percent.”

Following an 80:20 borrowing mix, the Philippines sources more debt locally, through treasury bills and bonds, than from foreign sources. This borrowing strategy leverages domestic banks and creditors who are flush with cash, while mitigating exposure to foreign exchange (forex) risks and volatility.

The government’s outstanding debt was equivalent to 62 percent of the country’s gross domestic product (GDP) in the first quarter, its highest level in two years. It climbed from 60.7 percent at the end of 2024. Specifically, domestic debt stood at 42.3 percent of GDP, while foreign debt had a GDP ratio of 19.7 percent.