BSP’s open market operations mop up PHP 1.3T in cash from financial system

The central bank has mopped up over PHP 1 trillion in excess money supply from the financial market through its monetary operations, the latest data showed.  

According to its Monetary Policy Report for June 2026, the Bangko Sentral ng Pilipinas’ (BSP) open market operations have absorbed a total of PHP 1.3 trillion in liquidity from the financial system as of June 9.

“The BSP’s monetary operations effectively kept the overnight reverse repurchase rate aligned with the target reverse repurchase rate,” it said.

More than half or 52.3% of the total was siphoned off the overnight reverse repurchase (RRP) facility.

This was followed by the overnight deposit facility, which accounted for about a fifth or 21.5% of the total liquidity absorbed as of early June.

Meanwhile, 19.2% was mopped up via the BSP securities, and 6.9% from the term deposit facility (TDF).

The central bank uses facilities such as the overnight RRP facility, TDF, and BSP securities to siphon off excess liquidity from the financial system and better guide market yields towards its policy rate.

At its July 10 auction, the weighted average accepted yield for the 28-day BSP bills stood at 4.73%, 2.04 basis points (bps) higher than the 4.7096% recorded in the prior week.

Meanwhile, the weighted average accepted rate for the seven-day term deposits on Wednesday went up by 2.63 bps week on week to 4.7079% from 4.6816%.

The central bank has limited its TDF and BSP securities offerings to a single tenor to rationalize its liquidity operations and focus on tenors that would boost monetary policy transmission.

In its latest report, the BSP noted that policy rate transmission “remained effective,” with its 25-bp hike in April already reflected in the interest rates of its short-term TDF and BSP bills as of early last month.

In April, the central bank raised benchmark rates for the first time after two-and-a-half years in response to growing inflation pressures brought by the Middle East war.

It followed it up by another 25-bp increase last month to continue its tightening cycle, bringing its target RRP rate to an almost one-year high of 4.75%.

According to the central bank, it takes about one-and-a-half to two years for monetary policy actions to make their way through the financial system. — Katherine K. Chan