BoB eyes record P5.1bn debt for gov't
Mbongeni Mguni | Monday January 26, 2026 06:00
Prior to the January 30 auction the highest amount ever sought by the central bank in its monthly forays into the capital market was P4.6 billion in January 2025.
Under government’s P55 billion domestic note issuance programme, the BoB floats bonds and Treasury Bills (TB) each month to raise debt for government in the capital market. At the auctions, primary dealers, who are exclusively banks, compete to lend to the government by offering the yields or returns they are seeking.
Publicly available data shows that both the actual yields and the demands for yields at each monthly auction have been rising sharply since late 2024, due largely to the sovereign credit downgrades, the government’s uncertain fiscal outlook and escalating interest rates.
On January 30, the BoB will float three TBs each seeking P1.5 billion with maturities ranging from three to 12 months, as well as three bonds each seeking P200 million with maturities ranging from 2031 to 2050.
The auction comes as the central bank struggles to raise funds for government in the capital market, due to the rejection of demands for higher yields as well as constrained liquidity in the market. A Finance ministry paper released this week estimated that since the start of the 2025–2026 financial year, the government bond issuance programme had only achieved a 37% allotment rate.
The lion’s share of the funds the BoB has been able to raise for the government in its monthly auctions has been on the shorter end of the spectrum, being the three-, six-, and 12-month TBs, albeit at increasingly higher yields.
The BoB and the government would ideally prefer more of the funding to come from longer-maturing bonds, as this would help lock in borrowing costs over longer periods and avoid the interest rate risks involved in rolling over shorter-term notes.
The funds from the auctions are critical for plugging the budget deficit, which this financial year is expected to reach more than P9.2 billion or 3.3 percent of GDP, due to the prolonged downturn in diamonds.
The BoB and the government have been engaging capital market participants in order to restore confidence in the direction of the fiscus and to manage the costs of the debt the government is seeking in the local market.
“Indeed, we have seen some poor performance, but in September we held our inaugural road show where we brought into the room investors, as well as primary dealers, just to speak about developments in the domestic market, as well as government being there to provide information in terms of the fiscals,” Baitshenotse Mmopelwa, the director of Financial Markets told BusinessWeek last month.
“Generally, when we get this pricing, sometimes investors do not understand where the government is, or at least are asking for some transparency,” she added.
At the last auction of government notes, held on Christmas Eve, the central bank auctioned off the three and six-month TBs, seeking P3 billion in total, but only raised P1.47 billion with 11 successful bids out of 23 submitted.
The highest bid rate received rose to 19.3% for the three-month bill, from 18.1% at the November auction, while that for the six-month bill rose to 19.9% compared to 18.8% in November. The weighted average yield of winning bids rose to 8.5 percent and 9.3 percent for the three and six month T-bill, compared to 8.1 percent and nine percent in November, respectively.