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 as it aims to enhance monetary policy transmission and push banks to better manage their liquidity.
“When 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 improve the transmission of monetary policy and then also encourage banks to manage their liquidity on their 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 not prompted by any market disruption.
“The banks knew about it well in advance. 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 such as the overnight reverse repurchase (RRP) facility, TDF and BSP bills to mop up excess liquidity in the financial system and better guide market rates towards the target 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.
However, the BSP has not auctioned off the 28-day term deposits for over five years to give way to its weekly offerings of securities with the same 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 year, 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 just the 28-day papers.
Mr. Abenoja told this paper that the central bank initially opted to decrease its monetary operations amid the anticipated high demand for liquidity during the holiday season.
In its monetary policy report (MPR) for December 2025, the BSP also said this was done to “rationalize the number of liquidity facilities and concentrate on tenors that would 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 are gradually shifting away from the issuance of short-term papers to manage liquidity as they want to boost activity in the money market.
Mr. Abenoja also noted that short-term rates are now near the central bank’s target policy rate, indicating that the existing instruments are effectively transmitting monetary policy.
“So, as long as you see money market rates — for example, those from BVAL (Bloomberg Valuation Service) or IBCL (Interbank Call Loan) — remain close to the policy rates with corresponding term premia, if it’s longer than the overnight (rate), then the scale of the operation, the volume and the instruments being used could be appropriate,” he said.
Still, the BSP deputy governor added that they could auction off the longer tenors again if they find gaps in monetary policy transmission.
According to the latest MPR, the interest rates in both facilities had fully reflected a total of 175 basis points (bps) in rate cuts.
The BSP has so far delivered a cumulative 200-bp rate cuts since 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 will have its first policy meeting this year on Thursday. A BusinessWorld poll of 16 analysts showed that they are expected to trim the policy rate anew by 25 bps to 4.25%.