The auction of Bangko Sentral ng Pilipinas’ (BSP) 28-day bills had a higher offer of P120 billion last Friday and it was fully awarded with tenders amounting to P148.81 billion.
The bids were lower compared to January 29’s P150.90 billion. The offered volume previously was P100 billion.
“The BSP offered and fully awarded the P120-billion offer in the 28-day bills auction,” said BSP Deputy Governor Francisco G. Dakila Jr. The total bid of P148.81 billion was equivalent to 1.24x the offered volume.
Dakila noted that the weighted average interest rate continued to decline, settling at 1.6124 percent and was lower by 1.276 basis points from the previous week’s yield of 1.6251 percent.
“The range of yields accepted remained low and narrower at 1.600-1.624 percent,” he said. In the previous auction, the range of yields was 1.600 percent to 1.630 percent.
Dakila continue to say that the oversubscribed BSP bills auction “reflect very ample liquidity” in the financial system, mostly extra liquidity held by banks.
The BSP is still studying expanding the list of eligible market participants to its securities facility. It is also currently in talks with banks and non-banks for its preference and market assessment. Since September 18 last year, the BSP is only offering 28-day bills.
Of the BSP’s three market operations in place, acceptance of term deposits through its weekly auction of term deposit facility (TDF) is still its most effective tool to siphon off excess money supply in the financial system, followed by the overnight deposit facility. The TDF was introduced in June of 2016 as part of the then newly implemented interest rate corridor system whose adoption enabled the BSP to have a more effective monetary policy transmission.
The issuance of BSP securities is expected to – in time – siphon off larger structural excess liquidity compared to the TDF. Unlike the TDF, the BSP bills and bonds are tradeable in the secondary market.