YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) short-term securities were mixed on Friday, even as demand was strong as it offered a lower volume compared to the previous week.
The BSP bills fetched bids amounting to P86.003 billion, higher than the P80-billion offer and the P112.781 billion in tenders for the P100-billion auctioned off a week prior. The central bank made a full P80-billion award of the securities.
Broken down, tenders for the one-month BSP bills reached P30.119 billion, just a tad above the P30 billion placed on the auction block but lower than the P46.395 billion in bids for a P40-billion offer in the previous auction.
Banks asked for rates ranging from 5.255% to 5.4%, a narrower but higher margin compared to the 5.198% to 5.395% seen a week earlier. With this, the average rate of the 28-day securities edged up by 0.23 basis point (bp) to 5.3454% from 5.3431% previously.
Meanwhile, the two-month papers attracted P55.884 billion in tenders, higher than the P50-billion offering but lower than the P66.386 billion in tenders for the P60 billion auctioned off the prior week.
Accepted rates were from 5.29% to 5.34%, narrower than the 5.25% to 5.359% band previously. This caused the average rate of the 56-day securities to decline by 1.52 bp to 5.3106% from 5.3258% a week prior.
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 has said.
BSP officials last month 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.
“I think we’re beginning to move away from our short-term issuance of BSP securities. We still have enough government securities in our books, and there’s enough of it so we can reduce liquidity,” BSP Governor Eli M. Remolona, Jr. said on Aug. 28.
“I think we’ve been spoiling the banks by helping them manage liquidity too much, whereas in other places … there’s a money market that allows banks and other entities to manage short-term liquidity. We don’t have a money market. Somehow, our money market disappeared, and part of the reason may be us. We’re the money market for them, maybe. So, that’s something we’re looking very closely at.”
Data from the central bank showed that around 50% of its market operations are done through its short-term securities. — K.K. Chan
