Gov’t cancels five-year FXTN offering

By Aaron Michael C. Sy, Reporter

THE PHILIPPINE GOVERNMENT has canceled its planned issuance of new fixed-rate Treasury notes (FXTN) this month as borrowing costs surged and the peso further weakened.

“Please be advised that the issuance of the five-year FXTN, as indicated in the schedule of Treasury bills and Treasury bonds issuances for the third quarter of 2026, is hereby cancelled,” the Bureau of the Treasury (BTr) said in a memorandum dated Sept. 15.

The BTr was initially scheduled to auction the new five-year FXTN on Sept. 22, while issuance was set for Sept. 24.

“(The cancellation) likely reflects Treasury’s decision to avoid locking in borrowing at elevated yields amid inflation, peso, and geopolitical pressures,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.

The local unit touched a new record intraday low of P62.925 against the dollar on Sept. 15, while its record low close was at P62.86 on Sept. 14.

On Wednesday, the currency strengthened by 9.6 centavos to close the session at P62.739 versus the greenback from its P62.835 finish on Tuesday.

In August, headline inflation eased to a five-month low of 6.1% from 6.2% in July amid lower food and utility prices. However, it remained above the central bank’s 3% target for a sixth straight month, bringing the year-to-date average inflation to 5.2%.

Mr. Rivera noted the government will likely adjust the timing, tenor, and mix of its borrowings while waiting for better market conditions.

“This does not mean RTB (retail Treasury bonds) will also be canceled, since retail bonds have different demand dynamics. Decision will ultimately depend on pricing and investor appetite,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said elevated Treasury yields make it more expensive for the government to borrow long term.

In a Viber message, Mr. Ricafort said the BTr can resort to issuing more T-bills and cash management bills (CMB) to satisfy demand for short-term borrowings.

The BTr revived its CMB offerings in June for the first time since the pandemic to help manage short-term liquidity needs amid elevated rates.

A trader said that the BTr will have to replace the jumbo issuance amid weak demand for longer-dated tenors. “As I mentioned before, their choice is to concentrate borrowing on shorter tenors.”

“It seems the five-year jumbo issuance is not appealing given the economic backdrop and external developments… Investors are naturally not comfortable investing in longer-term assets in anticipation of higher yields,” the trader said in a text message.

The trader said the government has been fulfilling its borrowing requirements mostly via short-term debt or T-bills.

Latest BTr data showed total gross borrowings rose by 20.2% to P2.113 trillion at end-July.

Of this, 73.27% or P1.548 trillion was domestic debt. It consisted of P1.157 trillion in fixed-rate Treasury bonds and P390.901 billion in net Treasury bills.

With the lack of appetite for a five-year paper, the trader said demand is unlikely to reach the government’s intended target for the issuance.

The government last issued fresh FXTN in February, where it raised an initial P235 billion from 10-year debt at its rate-setting auction.

The BTr wants to raise up to P380 billion from the domestic market this month — P250 billion via T-bills and P130 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.659 trillion or 5.4% of gross domestic product this year.