The Bangko Sentral ng Pilipinas' (BSP) short-term securities continued to fetch a higher average yield at Friday's auction, even as the offering was oversubscribed — meaning total tenders exceeded the amount the central bank put on the block.

The 28-day bills attracted tenders totaling P42.668 billion, well above the P30-billion offer and the P40.815 billion in bids for the P40 billion auctioned off the previous week. This translated to a higher bid-to-cover ratio of 1.4223 times from 1.0204 a week earlier. The bid-to-cover ratio, which divides total tenders by the offered volume, is a standard gauge of demand at a debt auction.

“The BSP fully awarded P30 billion of the tenders, with accepted yields narrowing to a range of 5% to 5.1%,” the central bank said in a statement.

The margin of accepted yields was slimmer than the 4.995% to 5.15% band recorded the previous week, with the rates the BSP accepted clustering within a tighter range. As a result, the weighted average accepted rate on the one-month papers rose by 1.49 basis points to 5.0801% from 5.0652% at the previous auction Average yields on the BSP bills have been on a steady week-on-week uptrend since mid-June.

The central bank uses the BSP securities alongside its term deposit facility to mop up excess liquidity in the financial system and to help guide short-term market yields toward its policy rate. The BSP bills also contribute to improved price discovery for debt instruments while supporting the transmission of monetary policy.

The BSP began auctioning off short-term securities on a weekly basis in 2020, initially offering only a 28-day tenor, and added a 56-day bill in 2023. It has since limited its securities offerings to a single tenor in order to rationalize its liquidity operations and focus on the tenors that would boost monetary policy transmission.

According to the BSP's August 2026 Monetary Policy Report, the central bank's open market operations have siphoned off P975.4 billion in liquidity from the financial system. Of this total, 14.8% was absorbed through BSP securities, while 45.6% was mopped up through the overnight reverse repurchase facility, 27.3% via the overnight deposit facility, and 12.3% from the term deposit facility.

The BSP said interest rates on its 28-day bills have fully reflected the two 25-basis-point policy rate hikes it delivered in April and June.

With the securities auctioned weekly, the next tender will show whether demand stays elevated and whether the mid-June yield uptrend extends.

— Katherine K. Chan