BSP bills’ rates drop on robust demand
YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) short-term securities fell on Friday as both tenors were oversubscribed.
The BSP bills fetched bids amounting to P171.6 billion on Friday, well above the P110-billion offer and the P136.913 billion in tenders for the same volume auctioned off the prior week. The central bank made a full award of the papers.
Broken down, tenders for the 28-day securities reached P84.104 billion, more than double the P40 billion auctioned off and also higher than the P65.45 billion in bids seen for a P45-billion offer volume in the previous week.
Banks asked for rates from 5.075% to 5.28%, wider and lower compared to the 5.259% to 5.374% margin seen a week earlier. This caused the weighted average accepted rate of the one-month bills to fall by 9.72 basis points (bps) to 5.2365% from 5.3337% previously.
Meanwhile, bids for the 56-day bills were at P87.496 billion, above the P70 billion placed on the auction block and the P71.463 billion in demand for the P65 billion offered the prior week.
Accepted yields were from 5.095% to 5.3%, below the 5.28% to 5.365% band recorded the prior week. With this, the average rate of the two-month papers dropped by 6.18 bps to 5.2565% from 5.3183% previously.
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.
They 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.
Data from the central bank showed that around 50% of its market operations are done through its short-term securities.
BSP Governor Eli M. Remolona, Jr. earlier said that they are gradually shifting away from the issuance of short-term papers in their liquidity management operations as they want to boost activity in the money market. — Katherine K. Chan
