BSP eyes another securities tenor

Published June 17, 2021, 6:08 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) is considering a new tenor for its weekly auction of securities facility.

We continue to study the possibility of introducing another tenor,” said BSP Governor Benjamin E. Diokno on Thursday. “But not at the moment,” he added. “We will announce that at the appropriate time.”

Diokno said market sentiment has improved, even as parts of economic centers are still on pandemic lockdown. He said improved market sentiment is indicated by high oversubscriptions in the primary auctions for government securities and the BSP’s auctions of term deposits (or TDF) and reverse repurchase facility.

“This allowed the BSP to slowly recalibrate and normalize its monetary operations” which was “in time with the gradual reopening of the economy (to) help facilitate the transmission of our accommodative stance to lower market rates,” said Diokno.

The BSP’s open market operations or OMO include outright purchases and sales of securities, foreign exchange swaps and issuance of BSP bills which was first offered in September last year.

The BSP securities facility basically withdraws structural liquidity from the financial system by “locking funds in longer-term monetary instruments” and it is also tradeable in the secondary market.

BSP senior director Zeno R. Abenoja of the Department of Economic Research said the way they operate OMO, since it is still a pandemic, is in a “supportive mode”.

“The central bank continues to maintain the accommodative policy stance and we will continue to do so as long as it is warranted to support the economic recovery,” he said during the BSP’s “GBED Talks” with the press. “But, when the time comes that there’s need to adjust some of our policies, then operations (OMO) may also gradually adjust.”

“What we’re seeing right now, for example in the open market operations, although this is still (in) a supportive mode to the economic recovery – we adjust the amount of operations whether in terms of the TDF or the BSP bills to make sure that the liquidity in the system will remain supportive to the needs of a recovering economy and to ensure that market rates fully absorb the reduction in the policy rates that we have implemented last year,” Abenoja explained.

The BSP bills auction continue to be oversubscribed. Last year, the securities facility absorbed 11.2 percent or P224 billion of the P2 trillion total liquidity that BSP released as part of its COVID-19 response.

BSP bills are offered only as 28-day tenor. It cancelled the 28-day TDF last October 2020 to start migrating funds to the securities facility of the same tenor.