Jumbo bond issue remains likely as Philippine government addresses financing needs
Key Takeaways
- •The Treasury is reconsidering its planned five-year FXTN sale amid volatile global bond markets and higher borrowing costs.
- •Market participants still view a jumbo bond issuance before the end of the year as likely because the government has ongoing financing needs.
- •The government could substitute regular bond auctions, retail Treasury bonds, Treasury bills or US dollar borrowing if the large transaction is delayed.
- •The Treasury’s domestic borrowing target for the month is P330 billion, including the planned Sept. 22 FXTN offer.
- •Middle East tensions, higher oil prices and weaker demand have contributed to elevated yields and partial awards in recent Philippine debt auctions.
The market still expects the Philippine government to issue a jumbo bond before the end of the year, even as the National Treasurer reconsiders a planned offering this month amid volatile conditions. The government still needs to raise funds to meet its financing requirements. The decision will shape whether those near-term domestic borrowing needs are met through a large benchmark transaction or spread across regular auctions, retail bonds, and other available funding channels.
Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the Bureau of the Treasury’s (BTr) reassessment of its planned offering of new fixed-rate Treasury notes (FXTNs) reflects higher yields and the peso’s weakness, which have increased borrowing costs.
“While the offering could be deferred to the fourth quarter if volatility persists, a complete cancellation appears unlikely as the government still has funding needs and views jumbo issuances as an important financing tool,” Mr. Asuncion said.
“If delayed, the BTr can rely on its regular bond auctions and planned RTB (retail Treasury bond) issuance to meet its borrowing requirements. The best window for a jumbo issuance would be when yields stabilize, the peso firms, and market risk appetite improves.”
Reyes Tacandong \u0026 Co. Senior Adviser Jonathan L. Ravelas said the BTr is facing a pricing problem rather than a funding problem.
“Delaying the jumbo issuance may actually be the prudent move if it allows the government to borrow at significantly lower costs while preserving fiscal flexibility,” he said.
Bloomberg reported last week that National Treasurer Sharon P. Almanza said the government was reconsidering its FXTN offer this month amid volatile global bond markets and a re-escalation of the conflict in the Middle East, which has renewed inflation concerns.
Under the BTr’s quarterly borrowing plan, the government aims to raise P330 billion from the domestic market this month. The plan includes an offering of new five-year FXTNs scheduled for Sept. 22.
The BTr last offered FXTNs in February, raising a total of P297.94 billion through new 10-year notes. Of that amount, P235 billion came from the new-money component of the offer, while P62.94 billion came from the switch program.
The Treasury began offering FXTNs last year to establish new benchmarks and improve market liquidity. The offerings use an issuance format aimed at institutional investors, including corporates, cooperatives, trust funds, retirement funds, and provident funds.
A bond trader said delaying the issuance could expose the government to even worse market conditions, particularly as uncertainty over the Middle East remains elevated.
“I don’t think they can afford to push it back, unless they are really hoping for a miracle that things will improve,” the trader said.
“What they can do is to tweak the borrowing mix in the coming months, focusing on where the current demand is, which is the Treasury bills (T-bills) to the five-year space, issue a relatively tame RTB volume of up to P300 billion, or mix with US dollar borrowing.”
Appetite for risk assets has weakened, while investors are demanding higher yields as the global economic environment remains challenging. The conflict in the Middle East remains unresolved and continues to escalate.
The conflict has contributed to market volatility and pushed up oil prices, adding to inflation and economic concerns worldwide, particularly in net importers such as the Philippines.
The BTr’s recent T-bill and Treasury bond offerings have reflected the risk-off environment. Higher yields and weak demand have resulted in several partial awards, including for shorter tenors.
Ms. Almanza said last month that the government was also waiting for more favorable conditions for its planned RTB offering this year. The government’s most recent RTB offering was in August 2025, when it raised P507.16 billion through five-year debt.
In June, the government raised $2.5 billion through a triple-tranche, US dollar-denominated bond offering. This completed its $5.3-billion external commercial borrowing program for 2026, after it had already raised $2.75 billion through another triple-tranche dollar bond issuance in January.
— Aaron Michael C. Sy
