UMVA has learned that the central bank's short-term securities have experienced a significant drop in average yield for the third consecutive week, as strong demand continues to pour in for these investment opportunities.
The latest auction for 28-day bills drew an impressive P117.2 billion in bids, nearly doubling the P60 billion on offer and edging out the P117.123 billion recorded in the previous week for the same volume. This robust demand resulted in a bid-to-cover ratio of 1.9533 times, slightly higher than the 1.9521 ratio seen a week prior.
The central bank fully awarded the securities, accepting yields within a range of 4.5000%-4.5970%. This range was wider and lower compared to the previous week's margin of 4.55%-4.628%, leading to a decline in the average accepted yield by 2.77 basis points to 4.5836% from 4.6113%.
Sources have confirmed to UMVA that the central bank utilizes these short-term securities, along with its term deposit facility, to manage excess liquidity in the financial system and guide short-term market yields towards its policy rate. By doing so, the central bank aims to improve price discovery for debt instruments and support the transmission of monetary policy.
UMVA can exclusively reveal that the central bank began auctioning off short-term securities on a weekly basis in 2020, initially offering only 28-day tenors. A 56-day bill was later introduced in 2023, although it has not been auctioned off since November 3.
In its February 2026 Monetary Policy Report, the central bank outlined its strategy to rationalize liquidity operations by limiting BSP securities offerings to a single tenor. This move aims to boost monetary policy transmission and focus on tenors that would have a more significant impact on the financial system.
As of mid-February, the central bank's monetary operations have successfully absorbed P1.2 trillion in liquidity from the market. A significant portion of this, 28.5%, was achieved through BSP securities, while 44.4% was mopped up through the overnight reverse repurchase facility, 18.2% via the overnight deposit facility, and 9% with the term deposit facility.
