YIELDS on the central bank’s short-term securities dropped on Friday even as both tenors went undersubscribed despite the lower volume offered.
The Bangko Sentral ng Pilipinas (BSP) bills fetched bids amounting to P59.557 billion, well below the P100-billion placed on the auction block and the P115.207 billion in tenders for the P120-billion offer a week prior. However, the central bank awarded only P55.057 billion in securities.
Broken down, tenders for the 28-day securities reached P17.921 billion, lower than the P40-billion offer and the P44.231 billion in bids seen for the P60 billion placed on the auction block a week prior. The BSP only accepted P14.421 billion in bids for the one-month bills.
Banks asked for rates ranging from 5.34% to 5.42%, narrower than the 5.295% to 5.43% margin seen a week earlier. This caused the average rate of the one-month bills to fall by 1.44 basis points (bps) to 5.3784% from 5.3928% previously.
Meanwhile, bids for the 56-day securities amounted to P41.636 billion on Friday, also below the P60-billion offer as well as the P70.976 billion in tenders for the P60 billion auctioned off by the BSP a week prior. However, the central bank awarded just P40.636 billion in two-month papers.
Accepted yields were from 5.358% to 5.4%, a slimmer range compared to the 5.35% to 5.4% band seen a week ago. With this, the average rate of the two-month BSP bills slipped by 0.53 bp to 5.3849% from the 5.3902% recorded in the previous auction.
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. — Katherine K. Chan
