BSP short-term bills fetch lower yield; demand up
DEMAND for the Bangko Sentral ng Pilipinas’ (BSP) short-term securities rose on Friday, pulling the average yield lower after the central bank reduced the amount offered at auction.
Tenders for the 28-day BSP bills exceeded the amount placed on the auction block, allowing the central bank to fully award the offering. The weighted average yield declined from the previous week as investors sought the short-term papers.
“The 28-day BSP bill auction saw good demand,” the central bank said in a statement.
The BSP rimmed the size of the auction compared with the previous week, which helped boost demand and improve the bid-to-cover ratio.
Accepted yields came within a slightly narrower range compared with the prior auction, while the average rate declined on a week-on-week basis.
The BSP has not offered its 56-day bills in recent months, leaving the one-month tenor as the only maturity currently being auctioned.
The central bank uses its securities facility alongside its term deposit facility to absorb excess liquidity in the financial system and guide short-term market rates toward its policy rate.
Earlier, BSP Deputy Governor Zeno Ronald R. Abenoja said the central bank had scaled back issuance of short-term debt to improve the transmission of monetary policy and encourage banks to manage liquidity more actively.
BSP data show that a significant portion of the central bank’s market operations are conducted through its debt auctions, which help withdraw liquidity from the banking system.
The short-term bills also support price discovery for debt instruments in the local market while reinforcing the central bank’s monetary policy signals.
The BSP began auctioning its own securities weekly in 2020 as part of broader efforts to strengthen liquidity management tools. The program initially offered only 28-day bills before a longer 56-day tenor was introduced in 2023.
The central bank has since relied on the facility as one of its main instruments for managing liquidity conditions in the financial system. — Katherine K. Chan
