YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) short-term securities dropped further on Friday as the offer was met with strong demand.
The BSP bills fetched bids amounting to P162.008 billion on Friday, higher than the P90-billion offer and the P153.359 billion in tenders for the P100 billion auctioned off a week prior. This led the central bank to fully award both tenors.
Broken down, tenders for the 28-day BSP bills reached P76.398 billion, well above the P40-billion placed on the auction block as well as the P66.805 billion in bids seen for the same volume offered the prior week.
Banks asked for rates ranging from 5.2625% to 5.408%, wider and lower than the 5.414% to 5.4585% band seen a week earlier. This caused the average rate of the one-month securities to decline by 4.32 basis points (bps) to 5.3976% from 5.4408% previously.
Meanwhile, bids for the 56-day bills amounted to P85.61 billion on Friday, higher than the P50-billion offering but slightly lower than the P86.554 billion in tenders for the P60 billion auctioned off by the BSP the previous week.
Accepted rates were from 5.395% to 5.42%, a lower range compared to the 5.3975% to 5.485% margin seen the week prior. With this, the average rate of the 56-day securities fell by 4.87 bps to 5.4053% from the 5.454% logged in the previous auction.
The central bank fully awarded its offer amid strong market demand, which led to lower rates, it said.
“Both tenors were … oversubscribed, with bid-to-cover ratios of 1.91 times for the 28-day tenor and 1.71 times for the 56-day tenor,” the BSP said in a statement.
The central bank uses the BSP securities and its term deposit facility to mop up excess liquidity in the financial system and to better guide short-term market rates towards its policy rate.
The BSP bills also contribute to improved price discovery for debt instruments while supporting monetary policy transmission, the central bank said.
The central bank securities were calibrated to not overlap with the Treasury bill and term deposit tenors also being offered weekly.
Data from the central bank showed that around 50% of its market operations are done through its short-term securities.
The BSP bills are considered high-quality liquid assets for the computation of banks’ liquidity coverage ratio, net stable funding ratio, and minimum liquidity ratio.
They can also be traded on the secondary market. — Luisa Maria Jacinta C. Jocson