BSP fully awards 28-day bills

The Philippine central bank fully awarded the short-term securities it sold at an auction on Friday, even as rates rose on growing inflation fears.

The Bangko Sentral ng Pilipinas (BSP) raised P110 billion in one-month bills, with total bids hitting P125.35 billion. The auction was 1.14 times oversubscribed.

The short-term debt fetched an average rate of 1.723%, 0.4 basis point higher than a week earlier. Yields sought by banks during the auction were 1.703% to 1.825%.

The central bank uses the securities and the term deposit facility to mop up excess liquidity in the financial system and guide market rates.

Concerns over elevated inflation at home and rising global oil prices pushed local yields higher, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

At its policy-setting meeting on Thursday, the central bank raised its inflation outlook for the year to 4.4% from 4.1% on rising food prices.

Inflation quickened to 4.9% in August from 4% a month earlier, the fastest in more than two years, bringing the eight-month average to 4.4%.

Mr. Ricafort said an ongoing retail dollar bond offering could have siphoned off some of the excess liquidity in the financial system, which added upward pressure to 28-day bill yields.

The Treasury bureau on Sept. 15 started offering five-year and 10-year retail dollar bonds, with coupon rates of 1.375% and 2.25%, respectively. It will end the sale on Oct. 1, unless closed earlier.

The bureau raised an initial $866.2 million during the price-setting auction last week, more than twice as much as the initial offer of $400 million amid high demand.

It sold $551.8 million worth of five-year dollar bonds and $314.4 million in 10-year dollar-denominated notes. — Beatrice M. Laforga