By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) may issue its first batch of central bank bonds as early as the first three months of 2020 as they prepare to conduct market-sounding exercises in the next quarter.
BSP Deputy Governor Francisco G. Dakila Jr. said they could market and sell so-called BSP Stabilization Bonds earlier than what’s on paper which is the second quarter of 2020. The BSP wants to accelerate plans.
On the tenor of the bonds, Dakila said it will be longer than the 28-day term deposit facility or TDF but not more than two years. He said a two-year term is too long. When asked if it will be one-year tenor as was reported earlier, he said – “we still have to decide on that.”
Apparently the market is in favor of two-year bonds based on the BSP’s consultation with banks. The BSP however prefers one-year tenor because the longer the bond’s maturity, the lesser liquidity the BSP will be able to siphon off the market. Central bank sells bonds to reduce money supply and the length of maturity will determine how effective liquidity management will be.
The BSP will be consulting the market again in the early days of the first quarter of 2020 on the timing of the issuance to ensure the BSP bonds will not compete with Bureau of the Treasury (BoT) transactions.
Dakila said the reason for the first quarter information campaign is to determine if they could issue the bonds earlier than the second quarter of 2020.
“Second quarter is our target but we’re trying to speed up the process,” he said.
The BSP and the BoT has had several meetings since 2018 to discuss which of the curve the BSP will be issuing its bonds so as not to interfere with BoT sale of debt securities. National Treasurer Rosalia V. De Leon has said that talks to establish a memorandum of agreement with the BSP began earlier or even before the amended BSP Charter was approved and signed last February which restored the BSP’s authority to issue its own debt securities.