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Manila Bulletin devider Business devider BSP bills remain oversubscribed

BSP bills remain oversubscribed

Published Dec 23, 2022 03:09 pm

The Bangko Sentral ng Pilipinas’ (BSP) auction of 28-day securities were again oversubscribed by 1.51 times on Friday, Dec. 23, due to sustained strong market demand, according to an official.

“The results of the BSP bill auction remain reflective of strong interest from market participants amid ample liquidity and a little over a week following the 50-basis point rate hike by the BSP on 15 December,” said BSP Deputy Governor Francisco G. Dakila Jr.

On Friday, BSP bills were offered at a volume of P120 billion, same as last week. It attracted P181.5 billion tenders which was higher than P163.7 billion last Dec. 16.

The weighted average interest rate rose by 1.9198 basis points (bps) to 6.4426 percent, or from 6.4234 percent last week. The yields accepted narrowed to a range of 6.2875 percent to 6.5000 percent, versus 6.2500 percent to 6.54 percent previously.

The BSP securities facility was first introduced in September 2020. The 28-day tenor used to be the 28-day term deposit facility.

For the third quarter or from August to September, the BSP mopped up P1.3 trillion of financial system liquidity. This was lower compared to P1.8 trillion in the second quarter.The BSP said its securities facility siphoned off about 31.5 percent of the total or P409.50 billion during the period.

The average bid-to-cover ratio was at 1.4x in the third quarter from 1.2x in the previous quarter.

The BSP mops up excess liquidity to control inflation and improve its management. As of end-November, the inflation rate has averaged at 5.6 percent. The BSP’s end-year forecast is an average 5.8 percent.

To bring inflation back to within the government’s target range of two percent to four percent by the second half of 2023, the BSP raised its key rate by a cumulative 350 bps so far.

As of its latest monetary policy meeting last Dec. 15, the BSP rate stands at 5.5 percent.

BSP Governor Felipe M. Medalla has already signalled to the market that they will be increasing the policy rate in the first quarter next year.
He also said that the December inflation will be the peak and not January 2023 due to base effects. The inflation climbed to a 14-year high of eight percent in November.

The BSP’s primary monetary policy instrument is the interest rate on its RRP facility. Through the RRP, the BSP borrows money from banks using government securities as collateral.

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