The central bank’s securities facility was oversubscribed but fetched a lower average interest rate on Friday, June 16, based on Bangko Sentral ng Pilipinas (BSP) data. The 28-day BSP bills was offered at P120 billion, the same as last week, and received tenders worth P141.681 billion, lower than bids on June 9 of P142.695 billion. The bid coverage ratio was at 1.1807 versus 1.1809 last week. Meanwhile, the weighted average interest fell by 0.5005 basis point (bp) to 6.6521 percent. The range of yields accepted narrowed to 6.5800 percent to 6.6771 percent on Friday compared to 6.5800 percent to 6.7000 percent previously. The BSP bills have an additional longer-dated tenor of 56 days on June 30, to catch the excess money that will be released to the financial system with the reduction in banks’ reserve requirement ratios (RRR). The BSP said the new tenor “increases the BSP’s flexibility to respond to changing liquidity conditions while providing additional guidance to short-term market interest rates.” The 56-day BSP bills will initially have small volumes before being gradually scaled up as market liquidity conditions allow. The BSP has reduced both banks and non-banks’ RRR to single-digit levels and this will be implemented by the end of this month. The cut in the RRR will unlease fresh funds in the financial system of about P360 billion that the BSP will have to mop up via BSP bills, term deposit auctions and reverse repurchase facility, among others. The RRR of the big banks and non-bank financial institutions was reduced by 250 bps, digital banks by 200 bps, and 100 bps for thrift banks, rural and cooperative banks. By June 30, all universal and commercial banks’ RRR as well as non-banks with quasi-banking functions will be 9.5 percent, while digital banks’ RRR will be six percent. Thrift banks’ RRR are slashed to a low of two percent while rural and cooperative banks will only have an RRR of one percent. The new ratios will apply to the local currency deposits and deposit substitute liabilities of banks and non-banks.