MANILA, Philippines - The Philippines will close its retail Treasury bonds issue ahead of schedule and expects to raise a record P150 billion ($3.5 billion) as small investors become more confident with longer-term placements, a senior government official said on Thursday.

"Total retail bond sales could easily reach P150 billion," Deputy Treasurer Eduardo Mendiola told Reuters. The country had raised P110 billion at its last retail bond sale in October, which was a record at the time.

The response from retail investors shows they are no longer afraid of long-term investments, as a liquid secondary market in the paper offers them an exit route, he said over the telephone.

Total bond sales reached P134 billion as of Wednesday, including P49.6 billion sold at an auction on Tuesday and purchases by state firms of P16 billion, Mendiola said.

The Treasury was no longer keen on offering a second retail bond issue this year, he added.

The Bureau of Treasury would close the sale of its 20-year retail bonds on Thursday, and may likely end the sale of its 15-year retail bonds on Friday, he said.

The nine-day public offer for 5.375% 2027 bonds and 5.875% 2032 bonds was originally set to end on Feb. 29.

One of the government's underwriters, First Metro Investment Corp. had earlier said Manila could easily top the P110 billion raised from October's retail bond sale.

The Southeast Asian country relies heavily on local and foreign borrowing to fund its budget deficit, expected to hit 2.6% of GDP this year, or P279 billion year, from an estimated 2% in 2011.

Mendiola reiterated the retail bond offer was meant to provide small investors with safe investment options and should not alter the government's local borrowing plan for the year.

Apart from First Metro Investment, BDO Capital, BPI Capital, and Deutsche Bank are issue managers of the bonds.

Landbank of the Philippines, Development Bank of the Philippines, Philippine National Bank, China Banking Corp. are joint coordinators.