By Kathryn Kristina T. Jose
The Bangko Sentral ng Pilipinas (BSP) fully awarded P20 billion worth of short-term debt instruments at a maiden auction on Friday, a move that would allow it to better manage cash circulating in the financial system.
Yields remained tolerable, with more investors channelling some of their funds to other financial options and as markets remained awash with cash.
The central bank awarded the 28-day bills at 1.75% to 1.8600%, while the weighted average rate reached 1.8355%. Total bids for the P20-billion borrowing was twice oversubscribed at P43.360 billion.
The central bank earlier said it would sell its own securities as an additional tool to manage liquidity. The auction volume would start small and would be gradually increased based on market response and consistent with the liquidity forecast.
The bills would have the same tenor as its 28-day term deposit papers, which will be auctioned off every Wednesday.
“They will be offered simultaneously at first, but on different days,” BSP Governor Benjamin E. Diokno said. “Eventually, the 28-day term deposit facility will be phased out.”
Friday’s auction results reflected the bigger market share for the central bank’s term deposit papers, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a mobile phone message.
“The 28-day term deposit facility offering on Wednesday may have sapped some of the demand that would have otherwise gone to the 28-day securities offered on Friday,” he added.
The bills still attracted a good chunk of the markets because total bids were more than double the programmed offer, he said.
The BSP bond yields reached levels as the rates on term deposit papers as the markets remain liquid.
“Given that the market is flush with liquidity while the BSP issuance remains relatively low compared with excess liquidity, we are not expecting an impact on market sentiment or activity,” said Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila.
He said he expects more bond offers from the central bank as it tries to mop off excess market liquidity.
“BSP will continue to issue its own securities as it looks to gain operational experience in the near term but look for the central bank to increase its offer size and mix up the length of tenors when the BSP finally needs to siphon off excess liquidity,” Mr. Mapa said.
Domestic liquidity or M3, which is considered to be the broadest measure of money supply, rose by 14.5% in July from a year earlier.