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Manila Bulletin devider Business devider BSP Bills maiden auction oversubscribed

BSP Bills maiden auction oversubscribed

Published Sep 20, 2020 05:00 am

The Bangko Sentral ng Pilipinas’ (BSP) maiden auction of 1-month BSP Bills, offered at P20 billion initially, received tenders amounting to P43.36 billion in Friday’s bids. This is the first central bank issued securities since the “JOBO” Bills in the 1980s.

MB file photo.
MB file photo.

According to the BSP, the 28-day tenor fetched a weighted average accepted yield of 1.8355 percent from a range of 1.7500 percent to 1.8600 percent.

The market showed its interest in the first BSP issued securities with a bid coverage ratio of 2.1680. The BSP Bills’ maturity date is October 20.

The 1-month BSP Bills took some of the volume from Wednesday’s auction of term deposit facility (TDF) which had a slashed volume of P20 billion from P50 billion last September 9.

All three tenors of the TDF, from 7-day to 28-day, were still oversubscribed this week but with the BSP Securities Facility, the TDF is expected to take a supporting or supplementary role as the central bank’s main liquidity management tool.

The BSP said the initial offering will start small and it will be “gradually scaled up depending on market response and consistent with liquidity forecasts”.

The BSP will offer BSP Bills initially because of the market preference for shorter tenors. The bills will have the shorter segment of the yield curve, the BSP explained, while the BSP Bonds will have longer maturities. The offered tenors will also depend on liquidity conditions as the BSP closely coordinate with the Bureau of the Treasury to avoid tenors overlapping.

The BSP said the issued securities will be beneficial for the central bank when there are large structural liquidity surpluses from capital flows or when the BSP reduces banks’ reserve requirement ratios.

The BSP securities will be offered to both big or universal and commercial banks, and thrift banks, as well as quasi-banks. The term of the securities --- initially 28-days for the BSP Bills – will be set by the BSP while the interest rates will be determined by the auction as per the BSP guidelines. The auction will be on a weekly basis until further notice.

The BSP restored its authority to issue securities on February 14, 2019 when the BSP Charter was amended as Republic Act No. 11211.

The “JOBO” Bills as named after central bank governor Jose B. Fernandez Jr.

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