BSP bills undersubscribed

The central bank’s auction of 28-day securities was undersubscribed with total tenders of P120.05 billion against offer of P140 billion.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said the bids were about 0.86x of the volume offered. He also said the market was pricing the BSP bills based on the latest 50 basis points (bps) increase to the BSP policy rate at 4.25 percent.

“The results of the BSP bill auction reflect the continued pass-through of the 50-bp hike in the BSP’s policy rate,” said Dakila.

As for the undersubscription, he said this could be “attributed in part to loan releases as well as to preference of counterparties’ clients for other assets such as government securities.”

“Looking ahead, the BSP’s monetary operations will continue to be guided by its assessment of the latest liquidity conditions and market developments,” said Dakila.

During Friday, Oct. 7’s auction, the weighted average interest rate continued to rise from last week. The yield increased by 17.9216 bps to 4.7093 percent.

Dakila said the yields accepted likewise shifted higher and widened to a range of 4.5280 percent to 5.0000 percent.

The BSP securities facility was first introduced in September 2020 to help the BSP siphon off excess liquidity from its pandemic relief measures, including the reduction in banks’ reserve requirement ratio at the time.

Yield of the BSP bills has been increasing following the BSP’s rate hikes. The BSP has lifted the benchmark rate by 225 bps since May this year. The market expects another round of rate hikes in November and December.