The central bank’s securities facility offered lower bills this week of P140 billion versus P170 billion previously, but was oversubscribed with P202.36 billion.
Based on Bangko Sentral ng Pilipinas (BSP) data, the weighted average interest rate (WAIR) for the 28-day BSP bills increased by 9.0626 basis points (bps) to 6.4707 percent, reflecting the Monetary Board’s lifting of the key overnight borrowing rate by 50 bps on Thursday. The policy rate is now six percent, the highest since Aug. 28, 2008.
The BSP accepted higher yields from a range of 6.3250 percent to 6.5985 percent on Friday.
“The results of the BSP bill auction were reflective of strong demand from market participants following the BSP’s latest policy decision to raise its key policy rate by 50 bps,” said BSP Deputy Governor Francisco G. Dakila Jr.
Dakila said the P202.36 billion bids Friday was as expected, which was equivalent to 1.445x the volume offered. The bid coverage ratio was at 1.4455 which was an improvement from Feb. 10’s 0.9953, indicating strong demand.
The BSP bills was first introduced in 2020 as part of the interest rate corridor system that the central bank implemented in 2016. It complemented the term deposit facility as a liquidity management tool to control inflation. For this year, the BSP expects above-target inflation of 6.1 percent.
Meanwhile, the BSP raised the policy rate on Feb. 16 to ensure inflation will be below four percent by end-2023. The market expects the BSP to raise the key rate again on March 23. So far, the BSP has adjusted the borrowing rate by a cumulative 400 bps since May 2022.