The 28-day Bangko Sentral ng Pilipinas (BSP) bill posted a lower yield in this week’s auction as investors continued to channel excess liquidity into short-term securities, the central bank said Friday.

The BSP reported that the weighted average interest rate (WAIR) for the 28-day tenor dropped by 6.45 basis points week-on-week to 4.9461 percent during the December 5 auction. The central bank kept the offer volume unchanged at P90 billion, while bids surged to P137.4 billion, resulting in a 1.53 bid-to-cover ratio, reflecting strong market demand.

With strong investor appetite, the BSP entirely awarded the offering, accepting yields of 4.9000 percent to 4.9900 percent, a slightly wider range than the prior week.

Rates lower for short-terms

By contrast, data from the 28 November auction showed softer interest for the shorter 27-day BSP bill. Although the offer volume was also set at P90 billion, tenders reached only P101.4 billion, of which the BSP awarded P81.4 billion, producing a lower 1.13 bid-to-cover ratio. The WAIR that week settled higher at 5.0106 percent.

The central bank uses its securities facility to manage liquidity and guide market interest rates. The strong demand for the 28-day bills indicates sustained liquidity in the system and investors’ preference for lower-risk, short-dated instruments amid ongoing monetary policy uncertainty.

The strong demand for BSP bills comes on the heels of continued expansion in domestic liquidity — the amount of money circulating within the Philippine economy — with the latest BSP data showing that M3 growth remains steady at P19.1 trillion as credit activity and cash circulation in the financial system pick up.

The central bank monitors domestic liquidity as a key factor in deciding whether to cut interest rates — a move that could stimulate economic activity if managed correctly. With November inflation down to 1.5 percent, the central bank now has more room to lower both policy and reserve requirement rates.

The BSP is currently in its “Quiet Period,” which bars officials from discussing matters — including any possible rate cut — that are on the Monetary Board’s agenda for its meeting next Thursday, 11 December.