The central bank’s auction of 28-day securities on Friday, June 3, received only P158.6 billion in bids, less than the offer of P160 billion as the market anticipates more policy rate hikes this year.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said that based on the auction results, the market is already pricing in the next Monetary Board’s decision to again raise the benchmark rates when it meets on June 23.
“(The) eligible market participants in the BSP bill auction are already pricing in their expectations of a policy rate hike. While the auction was slightly undersubscribed, overall liquidity in the financial system continues to be ample,” said Dakila.
The BSP bills’ volume of P160 billion this week was higher compared to May 27’s P140 billion.
“There was a slight undersubscription as tenders received reached 0.99x the offered volume or a total of P158.6 billion,” said Dakila.
The weighted average interest rate rose by 12.425 basis points to 2.5351 percent on Friday. The BSP official noted that the yields accepted shifted higher and widened to a range of 2.3125 percent to 2.7500 percent.
BSP securities are part of monetary operations under the interest rate corridor (IRC) framework for liquidity management in the financial system. As part of IRC, it helps implement monetary policy but it will not change the policy stance. The BSP first offered its securities facility in September 2020.
Last May 19, the BSP raised its key rate by 25 basis points to 2.25 percent. BSP Governor Benjamin E. Diokno has already signalled another rate hike this month.