BSP’s short-term securities fetch lower yields

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) short-term securities fell further on Friday as it capped its accepted rates for the two-month tenor despite the oversubscription.

The BSP bills fetched bids amounting to P136.183 billion on Friday, higher than the P130-billion offer but below the P162.008 billion in tenders for the P90-billion auctioned off a week prior. However, the central bank only awarded P120.066 billion in securities as it made a partial award of the two-month papers.

Broken down, tenders for the 28-day BSP bills reached P64.217 billion, above the P60 billion placed on the auction block but lower than the P76.398 billion in bids seen for the P40-billion offer seen the prior week. The BSP fully awarded the one-month papers.

Banks asked for rates ranging from 5.3% to 5.432%, higher but narrower than the 5.2625% to 5.408% band seen a week earlier. This caused the weighted average accepted rate of the one-month securities to decline by 1.34 basis points (bps) to 5.3842% from 5.3976% previously.

Meanwhile, bids for the 56-day bills amounted to P71.966 billion on Friday, a tad higher than the P70-billion offering but less than the P85.61 billion in tenders for the P50-billion auctioned off in the previous week. The central bank made a partial P60.066-billion award of the two-month securities as it only accepted bids that had lower yields versus those seen in the prior week.

Accepted rates were from 5.365% to 5.41%, a wider and lower margin compared to the 5.395% to 5.42% range seen the week prior. With this, the average rate of the 56-day securities dropped by 1.43 bps to 5.391% from the 5.4053% logged in the previous auction.

The central bank said the BSP bill (BSPB) yields continued their downtrend on Friday.

“Both tenors were oversubscribed, with bid-to-cover ratios of 1.07 times for the 28-day BSPB and 1.03 times for the 56-day BSPB,” it said in a statement.

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.

The central bank securities were calibrated to not overlap with the Treasury bill and term deposit tenors also being offered weekly.

Data from the central bank showed that around 50% of its market operations are done through its short-term securities.

The BSP bills 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. — Luisa Maria Jacinta C. Jocson