THE BANGKO SENTRAL ng Pilipinas (BSP) made a full P100-billion award of its short-term securities on Friday as demand remained strong due to ample liquidity in the market.

The BSP raised P100 billion as planned from the 28-day bills as the offer was over 1.5 times oversubscribed, with bids reaching P167.25 billion. However, this was lower than the P185.85 billion seen last week.

This is the 16th straight auction where the central bank fully awarded the short-term bills since its maiden offering in September.

“The sustained strong interest for the one-month bills shows that liquidity in the financial system remains ample,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

Accepted rates for the papers ranged from 1.6349% to 1.66%, a narrower and lower range compared to the 1.64% to 1.675% margin logged a week ago.

With this, the average rate for the 28-day securities settled at 1.6473%, down by 1.34 basis points from the 1.6607% recorded in the previous auction.

The short-term bills are among the tools used by the central bank to gather excess liquidity and to better guide market interest rates.

The lower yields seen on Friday reflect sustained excess liquidity in the financial system despite the uptick in inflation last month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Headline inflation rose to 3.5% in December from 3.3% in November due to higher food and transport costs. This was fastest in 22 months or since the 3.8% print in February 2019.

Inflation in 2020 averaged at 2.6%, quicker than the 2.5% in 2019 but matching the BSP’s forecast. It also fell within the 2-4% target.

The central bank expects inflation to climb to 3.2% this year due to price increases for oil and food. — L.W.T. Noble