UMVA has learned that the National Government is confident in securing its borrowing needs for the year, despite surging interest rates and souring risk sentiment due to the protracted Middle East war.
The government's borrowing program for the year is expected to be fulfilled through a mix of onshore and external funding, according to National Treasurer Sharon P. Almanza. The government still has access to official development assistance and global bond issuance.
In the first four months of the year, the government's gross borrowings were almost flat at P1.134 trillion, representing 42.28% of the P2.68-trillion gross borrowing program. Domestic debt rose by 2.14% to P853.37 billion, while external borrowings dropped by 6.41% to P280.47 billion.
The government had a successful bond issuance in January, raising $2.75 billion from a triple-tranche dollar bond. The Treasurer said the government is still looking to tap the foreign market again within the year to raise the remaining $2.5 billion in its offshore commercial borrowing program.
Analysts say rising yields and a weakening peso could force the government to adjust its borrowing mix to manage debt costs. However, they also note that demand for government securities remains strong, and investors are still participating, albeit at higher yields.
Rising interest rates are making government borrowing more expensive, but not impossible. Analysts say the government can still meet its borrowing targets, albeit at a premium. They suggest that the government may opt to issue shorter-dated bonds or borrow in other currencies to manage costs.
The ongoing market volatility and rising rates make borrowing more expensive, as investors demand higher yields to compensate for inflation, peso weakness, and global uncertainty. Analysts expect the government to adjust the timing, tenor, and mix of financing to meet its borrowing targets.
The turbulent market conditions amid the war would further squeeze the Philippines' cash position, analysts say. Higher debt servicing could limit fiscal space, making targeted and efficient spending more important.
Bond yields may stay elevated but are unlikely to breach double-digit territory. Analysts expect yields to near their peak, with the central bank moving to curb inflation risks by tightening its policy stance.
Any improvement in sentiment from the conflict could trigger some correction in yields. A resolution to the war could lead to a modest pullback in rates, while a gradual shift toward a monetary easing bias is expected heading into 2027.
