Yields on central bank securities drop further

YIELDS on the central bank’s short-term securities ended lower on Friday as both tenors were oversubscribed, even as total demand declined from the previous week.

The Bangko Sentral ng Pilipinas (BSP) bills fetched bids amounting to P119.459 billion on Friday, higher than the P80-billion offer but below the P149.916 billion in tenders for the same volume auctioned off a week prior. Still, the central bank awarded P80 billion in securities as planned.

Broken down, tenders for the 28-day BSP bills reached P48.109 billion, above the P30 billion placed on the auction block but lower than the P69.713 billion in bids for the same volume offered in the previous week. The central bank fully awarded the one-month papers.

Banks asked for rates ranging from 5.64% to 5.7135%, narrower than the 5.625% to 5.738% margin seen a week earlier. This caused the average rate of the one-month securities to decline by 3.23 basis points (bps) to 5.6812% from 5.7135% previously.

Meanwhile, bids for the 56-day bills amounted to P71.35 billion, more than the P50-billion offering but also below the P80.203 billion in tenders for the same volume offered by the central bank a week prior. The BSP made a full P50-billion award of the two-month bills.

Accepted yields were from 5.64% to 5.718%, lower than the 5.649% to 5.74% band seen a week prior. With this, the average rate of the 56-day securities went down by 0.94 bp to 5.7041% from the 5.7135% logged 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 the short-term BSP bills.

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. — A.M.C. Sy