Yields on BSP securities drop on strong demand

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) short-term securities continued to drop�� on Friday as both tenors were oversubscribed for a fourth straight week, with the central bank also reducing its offer volume.

The BSP bills fetched bids amounting to P125.798 billion on Friday, well above the P85-billion offer but below the P151.634 billion in demand for the P100 billion auctioned off a week prior. The central bank fully awarded both tenors.

Broken down, tenders for the 28-day securities reached P49.635 billion, exceeding the P35 billion auctioned off but lower than the P60.051 billion in bids seen for a P40-billion offer volume previously.

Banks asked for rates from 4.9% to 5.16%, narrowing from the 4.8% to 5.23% band seen a week earlier. This caused the weighted average accepted rate of the one-month bills to drop by 6.09 basis points (bps) to 5.1184% from 5.1793% previously.

Meanwhile, bids for the 56-day securities stood at P76.163 billion, higher than the P50 billion placed on the auction block but below the P91.583 billion in tenders for the P60 billion offered in the previous auction.

Accepted yields were from 5% to 5.168%, slimmer compared with the 4.9% to 5.24% margin logged the prior week. With this, the average rate of the two-month bills declined by 7.31 bps to 5.1156% from 5.1887% 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