BSP Short-Term Bill Yields Rise for 10th Straight Week Despite Ample Demand
Key Takeaways
- •The weighted average accepted rate on the BSP's 28-day bills increased for a 10th straight week, rising 0.84 basis point to 4.7708% from 4.7624%.
- •Monday's auction drew P32.557 billion in tenders for the P30 billion on offer, yielding a bid-to-cover ratio of 1.0852 versus 1.7438 in the previous offering.
- •The central bank accepted only P20.557 billion of the submitted bids to cap rising yields, with accepted rates ranging from 4.75% to 4.85%.
- •The BSP uses its securities and term deposit facility to absorb excess liquidity and steer short-term market yields toward its overnight reverse repurchase policy rate.
- •According to the June 2026 Monetary Policy Report, open market operations have siphoned off P1.3 trillion in liquidity, with 19.2% absorbed through BSP securities.
The average yield on the Bangko Sentral ng Pilipinas' (BSP) short-term securities edged higher for the 10th consecutive week on Monday, even as the auction drew stronger demand than the amount on offer.
The 28-day BSP bills attracted P32.557 billion in tenders, slightly above the P30 billion auctioned but below the P52.315 billion in bids submitted for the same offering volume on Aug. 14. The result translated into a bid-to-cover ratio of 1.0852 times, significantly lower than the 1.7438 ratio recorded in the previous offering.
Despite the oversubscription, the central bank accepted only P20.557 billion of the submitted bids in an effort to cap the rise in yields. Accepted rates ranged from 4.75% to 4.85%, a wider and higher band than the 4.725% to 4.771% seen at the prior auction. The weighted average accepted rate of the bills accordingly climbed by 0.84 basis point week on week, to 4.7708% from 4.7624%.
The BSP uses its securities and the term deposit facility to mop up excess liquidity in the financial system and to help guide short-term market yields toward its policy rate, which is the overnight reverse repurchase rate that anchors the central bank's interest rate corridor. The bills also contribute to improved price discovery for debt instruments while supporting monetary policy transmission.
The central bank began auctioning the short-term securities weekly in 2020, after the 2019 amendment to its charter, Republic Act No. 11211, restored its authority to issue its own debt paper as an open market operations tool. It initially offered only a 28-day tenor before adding a 56-day bill in 2023. It has since consolidated its BSP securities offerings into a single tenor to rationalize liquidity operations and focus on maturities that strengthen monetary policy transmission, with each weekly result providing a regular gauge of short-term money market rates and how closely they track the policy rate.
According to the central bank's June 2026 Monetary Policy Report, its open market operations have siphoned off P1.3 trillion in liquidity from the financial system. Of this amount, 19.2% was absorbed through BSP securities, while 52.3% was mopped up via the overnight reverse repurchase facility, 21.5% through the overnight deposit facility, and 6.9% from the term deposit facility.
— Katherine K. Chan, BusinessWorld
