The central bank on Friday raised P100 billion as planned via an offering of short-term securities, with rates pushed higher due to geopolitical concerns arising from the Russian invasion of Ukraine.
The 28-day bills of the Bangko Sentral ng Pilipinas (BSP) were oversubscribed, with demand hitting P148.75 billion.
Tenders were also higher than the P135.4 billion in bids attracted in the Monday auction. The usual Friday auction for the bills was conducted Monday as Feb. 25 was a holiday.
Accepted rates for the one-month papers ranged from 1.75% to 2.1%, narrowing from the 1.7% to 2.2475% range previously. This caused the average rate on the paper to increase by 2.81 basis points to 1.9492%.
The 28-day bills together with the term deposit facility are used by the BSP to mop up excess liquidity in the financial system and to better guide market rates.
Yields on the central bank’s one-month bills increased Friday as market participants remained worried about the impact of the Russian invasion of Ukraine on oil and commodity prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The United Nations estimates the number of refugees fleeing Ukraine at 1 million, Reuters reported. Thousands are estimated to have died or been wounded in the biggest attack on a European state since World War II.
As a result, market worries have centered on the supply of oil once sanctions bite against Russia, a major producer. The futures contracts for Brent crude and West Texas Intermediate, the benchmark prices for Europe and the US, respectively, hit multi-year highs of $119.84 and $116.57 per barrel Thursday before easing back towards the end of the trading session.
Since the start of the year Philippine pump prices of gasoline, diesel, and kerosene have jumped by P9.65, P11.65, and P10.30 per liter, respectively.
Mr. Ricafort said signals from the US Federal Reserve regarding their impending interest rate increase also caused yields to rise on BSP bills.
Fed Chairman Jerome H. Powell said he will back a quarter point increase in interest rates at the Federal Open Market Committee’s meeting between March 15 and 16, Reuters reported.
He said the Fed expects the conflict between Russia and Ukraine to cause elevated commodity prices. Ukraine is a major supplier of wheat.
“What we know so far is that commodity prices have moved up significantly, energy prices in particular. That is going to work its way through our US economy,” he said. – Luz Wendy T. Noble