BSP Bill Yields Rise for Eighth Straight Week as Auction Demand Softens
Key Takeaways
- •The average accepted rate on BSP's 28-day bills rose 1.75 basis points week on week to 4.7569%, marking an eighth consecutive weekly increase.
- •The auction drew P35.4 billion in bids against P40 billion on offer, resulting in a bid-to-cover ratio of 0.8850 and the first undersubscription in recent weeks.
- •The central bank accepted P34.6 billion of total bids to manage upward yield pressure, with accepted rates spanning a wider band of 4.729% to 4.8%.
- •BSP's open market operations have withdrawn P1.3 trillion in liquidity from the financial system, with 19.2% absorbed through BSP securities according to the June 2026 Monetary Policy Report.
- •The central bank has streamlined its securities offerings to a single 28-day tenor to rationalize liquidity management and strengthen monetary policy transmission.
The average yield on the Bangko Sentral ng Pilipinas' (BSP) short-term securities edged higher for an eighth consecutive week as demand for the offering weakened.
The 28-day BSP bills attracted P35.4 billion in bids on Friday, falling short of the P40 billion on offer and well below the P43.39 billion in tenders received for the same volume during the prior auction. The bid-to-cover ratio declined to 0.8850 times from 1.0848 times a week earlier, meaning the auction was undersubscribed for the first time in recent weeks as banks and other financial institutions pared their participation.
To contain the upward pressure on yields, the central bank accepted only P34.6 billion of the total bids submitted. Accepted rates ranged from 4.729% to 4.8%, a slightly wider and higher band compared with the 4.72%–4.76% range observed the previous week. Consequently, the average accepted rate on the one-month bills rose by 1.75 basis points week on week to 4.7569%, up from 4.7394%.
The BSP deploys its securities alongside the term deposit facility to absorb excess liquidity from the financial system and to help steer short-term market yields toward its policy rate. The bills also enhance price discovery for debt instruments and reinforce the transmission of monetary policy. When demand for these instruments softens, yields typically rise as the central bank must offer more attractive returns to draw bids — a dynamic that can signal tighter short-term funding conditions or shifting preferences among banks for where to park surplus funds.
The central bank began conducting weekly auctions of short-term securities in 2020, initially offering only a 28-day tenor before introducing a 56-day bill in 2023. It has since streamlined its BSP securities offerings to a single tenor to rationalize liquidity management operations and concentrate on maturities that strengthen monetary policy transmission.
According to the central bank's June 2026 Monetary Policy Report, its open market operations have withdrawn P1.3 trillion in liquidity from the financial system. Of that total, 19.2% was absorbed through BSP securities, 52.3% through the overnight reverse repurchase facility, 21.5% via the overnight deposit facility, and 6.9% through the term deposit facility. — Katherine K. Chan
