Philippine gov falls short of debt target due to higher rates

On Tuesday, the Philippine government fell short of its target in raising funds through long-term local debt due to higher interest rates demanded by creditors amid market volatility caused by the Israel-Iran conflict.

The Bureau of Treasury (BTr) borrowed P27.6 billion from reissued T-bonds with a remaining life of nine years and 10 months, below its original goal of P30 billion.

Total demand for the offering was P55.4 billion, which is 1.8 times more than the initial size but less than expected due to 'muted market demand' and higher bid rates.

The auction yielded an average rate of 6.428 percent, up from 6.226 percent in the previous offering last May and above the secondary market rate of 6.38 percent for similar tenors.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., attributed the higher rates to geopolitical tensions between Israel and Iran, which have led to increased global crude oil prices.

For this year, the Marcos administration aims to borrow P2.55 trillion from both domestic and foreign sources to cover a projected budget gap of P1.54 trillion or 5.3 percent of GDP.