THE BANGKO SENTRAL ng Pilipinas (BSP) fully awarded its offer of short-term bills on Friday even as banks asked for higher yields following the increase in US Treasury rates ahead of the Federal Reserve’s policy review. 

The BSP raised P110 billion as programmed via its offer of 28-day bills on Friday, with tenders reaching P135.8 billion. However, the demand was lower than the P137.82 billion in bids seen last week. 

Accepted rates ranged from 1.7% to 1.74%, a slightly narrower margin compared to the 1.7% to 1.7415% band logged during the previous auction. This caused the average rate of the bills to increase by 0.09 basis point (bp) to 1.719% from the 1.7181% quoted previously. 

The BSP bills and the term deposit facility are used by the central bank to gather excess liquidity in the financial system and guide market rates.  

Rates for the BSP’s one-month bills inched up to track US Treasury yields’ ascent ahead of the Federal Open Market Committee meeting next week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said. 

The yield on the 10-year US Treasuries on Thursday increased 2.9 bps to 1.333%, while the rate of the 30-year paper inched up 1.2 bps to 1.881%, Reuters reported.  

The Fed will review its policy settings on Sept. 21 to 22. The market is waiting for more hints regarding the timeline of their plan to wind down asset purchases. 

Following its July meeting, the Fed said it will keep rates low until the US economy has achieved maximum employment and inflation settles at 2% over the longer run. 

Mr. Ricafort said the higher yields sought by banks for the BSP bills reflects how the retail dollar bond (RDB) offering of the national government “siphoned off some of the excess liquidity in the financial system”. 

The Bureau of the Treasury on Wednesday raised an initial $866.2 million through its maiden sale of RDBs. It borrowed $551.8 million from the five-year notes and $314.4 million via the 10-year RDBs during the price-setting auction. — L.W.T. Noble