Yields on BSP bills go down following rate cut
YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) short-term securities ended lower on Friday, even as the offer went undersubscribed, after it delivered a second straight rate cut.
The BSP bills fetched bids amounting to P114.299 billion on Friday, higher than the P110-billion offer but lower than the P144.219 billion in tenders for the P130-billion auctioned off on June 13. The central bank partially awarded its offering of securities as the one-month tenor was undersubscribed.
Broken down, tenders for the 28-day BSP bills reached only P46.322 billion, below the P50-billion placed on the auction block as well as the P60.602 billion in bids seen for the same offer volume the prior week. The BSP accepted all the submitted bids.
Banks asked for rates ranging from 5.28% to 5.9%, much wider than the 5.53% to 5.6% band seen a week earlier. This caused the average rate of the one-month securities to decline by 8.94 basis point (bps) to 5.4905% from 5.5799% previously.
Meanwhile, bids for the 56-day bills amounted to P67.977 billion on Friday, higher than the P60-billion offering but lower than the P83.617 billion in tenders for the P80 billion offered by the BSP on June 13. The central bank fully awarded P80 billion in two-month securities.
Accepted rates were from 5.29% to 5.58%, a lower and wider range compared to the 5.545%-5.597% margin seen the week prior. With this, the average rate of the 56-day securities dropped by 6.21 bps to 5.5214% from the 5.5835% logged in the previous auction.
The BSP bills (BSPB) fetched lower average rates on Friday following the policy rate cut announced the day prior, the central bank said in a statement.
The BSP slashed its target reverse repurchase rate by 25 bps to 5.25% at its policy meeting on Thursday, as forecasted by 15 out of 16 analysts in a BusinessWorld poll.
The Monetary Board has now reduced benchmark borrowing costs by 125 bps since it began its easing cycle in August last year. BSP Governor Eli M. Remolona, Jr. said they could deliver at least one more 25-bp cut this year, depending on the data.
The central bank uses the BSP securities and its term deposit facility to mop up excess liquidity in the financial system and to better guide short-term market rates towards its policy rate.
The BSP bills also contribute to improved price discovery for debt instruments while supporting monetary policy transmission, the central bank said.
The central bank securities were calibrated to not overlap with the Treasury bill and term deposit tenors also being offered weekly.
Data from the central bank showed that around 50% of its market operations are done through its short-term securities.
The BSP bills are considered high-quality liquid assets for the computation of banks’ liquidity coverage ratio, net stable funding ratio, and minimum liquidity ratio.
They can also be traded on the secondary market. — AMCS
