By Katherine K. Chan, Reporter
THE BANGKO SENTRAL ng Pilipinas (BSP) has limited its term deposit facility (TDF) and short-term securities to a single tenor each because it goals to reinforce monetary policy transmission and push banks to higher manage their liquidity.
“Once we consulted with banks they (said they) can manage their liquidity positions even with fewer facilities,” BSP Deputy Governor Zeno Ronald R. Abenoja told BusinessWorld on the sidelines of an event last week.
“So, it’s really to enhance the transmission of monetary policy after which also encourage banks to administer their liquidity on their very own.”
Mr. Abenoja assured that the central bank’s decision to narrow the offerings of its facilities to single tenors was merely “fine-tuning” and never prompted by any market disruption.
“The banks knew about it well upfront. So, we discussed it beforehand,” he said. “So, (it was just) tweaking (and) small, fine-tuning. There aren’t any disruptions.”
The central bank uses facilities resembling the overnight reverse repurchase (RRP) facility, TDF and BSP bills to mop up excess liquidity within the economic system and higher guide market rates towards the goal RRP rate.
The BSP first opened weekly auctions for the TDF in 2016 and the short-term securities in 2020.
For the TDF, it initially offered the seven-day and 28-day tenors and later added the 14-day papers in February 2018.
Nevertheless, the BSP has not auctioned off the 28-day term deposits for over five years to present method to its weekly offerings of securities with the identical tenor.
Meanwhile, the central bank began offering only a 28-day tenor for the BSP bills before adding the 56-day bill in 2023.
In November last yr, the BSP stopped issuing the 14-day TDF, leaving only a single seven-day tenor. Since then, it has also limited its auction for the BSP bills to simply the 28-day papers.
Mr. Abenoja told this paper that the central bank initially opted to diminish its monetary operations amid the anticipated high demand for liquidity through the holiday season.
In its monetary policy report (MPR) for December 2025, the BSP also said this was done to “rationalize the variety of liquidity facilities and think about tenors that might enhance monetary policy transmission.”
As of mid-November 2025, the BSP’s monetary operations have absorbed P1.5 trillion in liquidity from the market. Of this, 42.4% was siphoned off through BSP securities, 34.6% from overnight reverse repurchase agreements, 17.6% via the overnight deposit facility, and 5.4% through the term deposit facility.
BSP Governor Eli M. Remolona, Jr. earlier said they’re step by step shifting away from the issuance of short-term papers to administer liquidity as they wish to boost activity in the cash market.
Mr. Abenoja also noted that short-term rates at the moment are near the central bank’s goal policy rate, indicating that the present instruments are effectively transmitting monetary policy.
“So, so long as you see money market rates — for instance, those from BVAL (Bloomberg Valuation Service) or IBCL (Interbank Call Loan) — remain near the policy rates with corresponding term premia, if it’s longer than the overnight (rate), then the dimensions of the operation, the quantity and the instruments getting used might be appropriate,” he said.
Still, the BSP deputy governor added that they might auction off the longer tenors again in the event that they find gaps in monetary policy transmission.
In line with the most recent MPR, the rates of interest in each facilities had fully reflected a complete of 175 basis points (bps) in rate cuts.
The BSP has to date delivered a cumulative 200-bp rate cuts because it began its easing cycle in August 2024, which brought the benchmark policy rate to an over three-year low of 4.5%.
The Monetary Board may have its first policy meeting this yr on Thursday. A BusinessWorld poll of 16 analysts showed that they’re expected to trim the policy rate anew by 25 bps to 4.25%.