BSP debt yields continue to decline

YIELDS on the Bangko Sentral ng Pilipinas’ short-term securities fell further on Friday as investors continued to show strong demand for the central bank’s liquidity management instruments.

Total bids for its reached P151.63 billion, exceeding its P100-billion offer though slightly below last week’s P171.6 billion in tenders for a P110-billion sale. The central bank fully awarded both the 28- and 56-day bills.

Bids for the 28-day securities reached P60.05 billion, above the P40-billion offer but less than the P84.1 billion in the previous week. Rates ranged from 4.8% to 5.23%, leading the average yield to decline by 5.72 basis points (bps) to 5.1793%.

Demand for the 56-day bills hit P91.58 billion, higher than the P60-billion offer and last week’s P87.5 billion in tenders for a P70-billion sale. The accepted rates ranged from 4.9% to 5.24%, pulling the average yield down by 6.78 bps to 5.1887%.

Both tenors were oversubscribed, with bid-to-cover ratios of 1.5 times for the 28-day bills and 1.53 times for the 56-day tenor, the BSP said.

The central bank uses the facility and term deposit auctions to absorb excess liquidity and align short-term market rates with its benchmark policy rate.

The BSP noted that the bills enhance price discovery for short-term debt instruments and strengthen monetary policy transmission. These securities are classified as high-quality liquid assets and may be traded in the secondary market.

About half of the BSP’s market operations now take place through its short-term securities. Governor Eli M. Remolona, Jr. earlier said the central bank plans to gradually reduce reliance on such debt to encourage greater activity in the domestic money market. — Katherine K. Chan