2 weeks ago
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Looming Trump tariff hikes dampened investor demand, driving up interest rates on long-term government bonds.
On Tuesday, March 4, the Bureau of the Treasury (BTr) borrowed ₱30 billion through the sale of reissued five-year bonds.
Bids totaled ₱56.82 billion, nearly double the offered amount but significantly lower than the ₱98.63 billion recorded in the Feb. 4 auction for a similar tenor.
The Treasury bonds (T-bonds), with a remaining maturity of five years and four months, were awarded at an average rate of 6.019 percent.
This is 8.4 basis points (bps) higher than the 5.935 percent rate for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.
According to Michael Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBS), these rates also increased by 5.1 bps from the 5.968 percent recorded in the Feb. 4 auction.
This comes despite the five-year PHP BVAL yield hovering at nearly three-month low since mid-December last year, he noted.
Ricafort said this increase partly reflects market concerns over potential US inflation and fewer US Federal Reserve rate cuts after Trump reaffirmed higher tariffs on Canada, Mexico, and China—a move that could influence the monetary policy of Bangko Sentral ng Pilipinas (BSP).
He further noted that the yield increased due to weaker investor demand, dropping from the February level. This decline in demand, also lower than recent T-bond auctions with similar tenors, suggests weakened investor sentiment amid concerns over Trump’s tariff policies.
However, the impact was partly offset by recent cuts on banks’ reserve requirements and the Philippines’ removal from the global money-laundering watchlist as positive factors.
For 2025, the national government has programmed an 80:20 borrowing mix—80 percent domestic, 20 percent foreign. These loans are borrowed through treasury bills and bonds.
The strategy taps into the strong liquidity of local banks and lenders while reducing foreign exchange (forex) risks and market volatility.
