The Bangko Sentral ng Pilipinas’ (BSP) auction of 28-day securities remained oversubscribed last week as the market anticipates the BSP Monetary Board’s interest rate hike on Thursday, Nov. 17, of 75 basis points (bps).
The BSP bills was offered at P120 billion last Friday, up from the previous week’s P100 billion volume.
BSP Deputy Governor Francisco G. Dakila said the securities auction attracted P151.63 billion bids which was 1.26 times oversubscribed versus the offer.
The weighted average interest rate, meantime, increased by 16.0212 bps to 5.5930 percent in expectation that by Nov. 17, the BSP policy rate will be at five percent. During the auction, the yields accepted ranged from 5.3500 percent to 5.7500 percent.
“The results of the BSP bill auction continue to reflect market participants’ prevailing expectations of a further rate hike in the next BSP policy meeting,” said Dakila.
The securities facility only has one tenor since it was introduced in September 2020. It mops up liquidity as one of BSP’s inflation management tool.
The BSP restored its authority to issue securities in 2019 when the central bank charter was amended. The facility helps the central bank maintain monetary stability under the interest rate corridor framework for monetary operations.
Last month, to improve the facility’s mopping liquidity absorption, the BSP expanded the access of trust entities with non-resident funds to the bills.
Basically, the BSP has allowed unit investment trust funds (UITFs) of eligible trust departments of banks, regardless of whether the UITFs have funds from non-residents, to invest in BSP securities via the secondary market.
Trust units may purchase securities in the secondary market for any UITF in which the share of net assets of non-residents does not exceed 10 percent of the net assets of the fund.
Before the new circular, trust entities can only invest in the BSP securities through their UITFs if there are no non-resident participants in said UITFs.