The May government bond and T-Bill auction successfully raised the full P3.5 billion on offer, selling P3 billion in T-Bills and P500 million of bonds. Once maturing T-Bills are netted out, the auction raised P839 million in new borrowing. This continues a trend ongoing since January 2026, where auctions have been largely successful in selling the full amounts on offer, in contrast to the shortfalls that characterized auctions through 2025.
What is interesting in the May auction is that yields appear to have stabilized, marking a change from the steady increase in interest rates seen over the past year or more. The stop-out yield on the 3 month T-Bill was 10.46%, down from 10.87% in April. This is the first time that T-Bill yields have dropped since August 2024. Nevertheless T-Bill yields are still very high by historical standards – a year ago the 3-month T-Bill yield was only 4.01%.
At the other end of the yield curve, the stop-out yield on the 24-year long bond dropped from 13.30% when it was last auctioned in March to 13.25% in May.
It is too early to tell whether this represents a peaking of interest rates on government bonds and T-bills. The development appears to reflect a sharp increase in banking system liquidity and hence availability of funds for investing in T-Bills in particular. Future trends in government borrowing rates will depend on liquidity trends going forward as well as government’s borrowing needs. But for the time being, the high interest rates on government bonds and T-Bills continue to provide a floor for interest rates on bank credit.