1-month BSP Bill still oversubscribed

The auction of the Bangko Sentral ng Pilipinas’ (BSP) 28-day BSP Bill remained oversubscribed with a liquidity-heavy market while its average rate stayed put where it was a week ago.

On Friday, the third week of the one-month BSP security auction, the BSP offered P50 billion and received tenders amounting to P87.51 billion. The volume was higher than September 25’s P30 billion. The bids were also higher compared to last week’s P69 billion.

The weighted average accepted yield for the BSP Bill was 1.8423 percent, unchanged from the previous auction. The bid coverage ratio this week was only 1.7502 versus 2.30 previously.

The 28-day BSP Bill has a similarly-dated tenor in the term deposit facility (TDF). This week, both the 28-day TDF and BSP Bill were offered at P50 billion each, up from P30 billion. The yields were also close to one another with the 28-day TDF’s at 1.8426 percent last Wednesday and the debt instrument fetching 1.8423 percent on Friday.

BSP Deputy Governor Francisco G. Dakila Jr. said the BSP will gradually continue to adjust the BSP security facility’s volume depending on the “overall monetary operations and liquidity assessments.”

BSP Governor Benjamin E. Diokno has said that the market has a preference for short-term maturities of up to two months but only the one-month BSP Bill is offered to banks, at the moment.

The BSP issued its first BSP Bill on September 18 after it has restored its authority to sell bonds and bills last year, with an amended central bank charter. It took the BSP that much time to tie links with the Bureau of the Treasury (BTr), come with compromised tenors to avoid overlapping with BTr issuances and conduct market sounding exercises.

Diokno said the BSP securities is an additional instrument for managing liquidity in the financial system and it is risk-free and will help deepen the local bond market.