Central bank bills’ rate drops further on oversubscription

THE BANGKO SENTRAL ng Pilipinas’ (BSP) short-term securities on Monday fetched a lower average rate for a fourth straight week amid strong demand for a lower offer volume.

Bids for the BSP’s 28-day bills amounted to P80.892 billion on Monday, more than quadruple the P20 billion auctioned off. This was below the P117.2 billion in tenders seen for the P60-billion offer on June 5.

This translated to a significantly higher bid-to-cover ratio of 4.0446 times versus the 1.9533 ratio seen for the previous auction.

With this, the central bank made a full award of its offering.

Accepted yields for the one-month papers were from 4.45% to 4.5125%, lower and narrower than the 4.5% to 4.597% range in the previous auction. This caused the average accepted rate to decline by 7.54 basis points week on week to 4.5082% from 4.5836%.

A bond trader said the lower BSP bills offer volume on Monday was likely due to the Bureau of the Treasury’s (BTr) move to sell cash management bills (CMBs) for the first time since 2020, auctioning off P20 billion each in 35-day and 63-day CMBs.

Broken down, it made a full award of the one-month tenor on Monday, raising P20 billion as planned as tenders reached P36.41 billion, with the average rate at 4.611%.

Meanwhile, it made a partial award of the two-month bills, selling only P19.6 billion as the offer was undersubscribed, with bids drawn worth just P19.8 billion. The tenor’s average yield was at 4.942%.

The BSP also used to offer 56-day bills, but has not auctioned the tenor off since Nov. 3.

The bond trader added that the maturity of the one-month CMBs being close to the tenor of the central bank securities is unlikely to affect demand for the BSP’s offerings.

“No effect on demand because the same amount was just channeled from the BSP to the BTr,” the trader said. “In a way, this is helpful for the BTr as demand for longer tenors has been weak for the past few months.”

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

In its February 2026 Monetary Policy Report, the central bank said it has limited its BSP securities offerings to a single tenor to rationalize its liquidity operations and focus on tenors that would boost monetary policy transmission.

As of mid-February, the central bank’s monetary operations have siphoned off P1.2 trillion in liquidity from the market. Of this, 28.5% was absorbed through BSP securities, while 44.4% were mopped up through the overnight reverse repurchase facility, 18.2% via the overnight deposit facility, and 9% from the term deposit facility. — Katherine K. Chan