What you need to know about the new 5-year retail treasury bond

In the next few days, the Bureau of the Treasury (BTr) is launching a new 5-year retail treasury bond (RTB) to help manage its financial obligations.

Not only will it help the government address its national debt. It will also give investors an opportunity to lend money to the government and earn interest in return.

If the word opportunity appeals to you, read on to learn more.

Strategic debt management

The BTr is facing a challenge: over PHP 1 trillion in government debt is scheduled to mature in 2030 and 2031. With such a big amount, the BTr is strategically issuing this new RTB to effectively spread out its debt obligations and avoid concentration in those years.

To facilitate this, the BTr may likely cancel two other bond auctions, or FXTN auctions, on August 5 (5-year) and August 12 (7-year). Issuing a 5- to 5.5-year bond specifically helps spread out debt obligations and prevent further heavy concentration.

Pricing is anticipated around August 5, 2025, with the public offer period from August 5-15, 2025. A key feature is an exchange program. If you currently hold eligible existing government bonds, you may be able to swap them for these new 5-year RTBs.

This will smooth out short-term refinancing risks and lengthen the average debt life. So far, the government's 2025 borrowing program is progressing well, having achieved 62% of its PHP 2.6-trillion target by mid-June.

Highlights

• The BTr's new 5-year RTB issuance is tentatively scheduled for pricing on August 5, 2025, with the offer period running until August 15, 2025.
• The market expects yields for the new RTB to be between 5.875% and 6.125%, with a focus on 6.00%.
• The issuance may include an exchange offer, allowing investors to swap eligible existing RTBs for the new 5-year bond.
• Historically, RTB issuances have made up about 16% of national government issuances, and rates usually moved higher after past issuances.

Market Impact

• The extra yield on the 10-year benchmark bond has recently shrunk to approximately 30 basis points from 45 basis points, showing a flattening of the yield curve between the 5-year and 10-year periods. This suggests additional return for taking on longer-term risk.
• The 5-year bond yields have not performed as well as expected due to the anticipation of the new RTB. This makes the upcoming RTB a potentially attractive deal.
• The BSP’s expected continued rate cutting (four more cuts forecast by Metrobank Research – two in 2025, two in 2026) creates favorable market conditions for bond yields.
• The upcoming influx of over PHP 800 billion in maturing bonds in the next two months could potentially push yields lower after the RTB issuance, as investors look for new places to park their funds.

Our Recommendation: Seize the Opportunity

Our recommendation is to participate in the upcoming 5-year RTB issuance, and strategically position within the 5–7-year segment, the belly of the curve.

With PHP 800 billion in bonds maturing soon, this new RTB offers a timely opportunity to lock-in relatively high yields before increasing demand potentially drives rates lower (which means an increase in price for bond investors).

Given the government’s strong backing, RTBs offer a highly secure addition to any diversified investment portfolio. They also serve as a strong foundation for those looking to start investing in bonds.

The recent flattening of the yield curve, with the 10-year yield shrinking, further enhances the risk-reward profile of this segment, making the 5-year RTB particularly appealing.

If you are a bond investor with Metrobank, you may reach out to your investment specialist or relationship manager. If you wish to explore this opportunity with Metrobank, learn about how to sign up here.

MATTHEW APOSTOL is an Investment Counselor with Metrobank's Institutional Investors Coverage Division, where he specializes in creating bespoke financial solutions for high-net-worth individuals, leveraging his experience in investment sales and a strong understanding of financial markets. Matthew holds a Bachelor of Science in Business Economics and is currently pursuing a Master in Applied Economics degree at De La Salle University.