Liquid market gobbles up BSP’s 28-day IOUs; P100B raised

The Bangko Sentral ng Pilipinas (BSP) issued on Friday P100 billion worth of 28-day debt securities, which fetched a lower average yield compared to last week amid excess market liquidity.

The one-month bills maturing on Feb. 22 were 1.74 times oversubscribed, with tenders reaching P174.22 billion.

In a statement, BSP Deputy Governor Francisco Dakila Jr. said the weighted average interest rate declined this week by 2.449 basis points to 1.7053 percent.

“Short-term market interest rates remain low, supported by ample liquidity in the financial system,” Dakila said.

Short-dated T-bills from the Bureau of the Treasury have also seen rates decline since the start of the year amid expectations of softer inflation and continued economic support from the BSP by way of the current record-low 2-percent policy rate.

But Dakila said bid rates spread widened this week compared to last week, with the securities fetching a high of 1.716 percent and a low of 1.65 percent.

Dakila said the auction results were “in line with the observed normalization in market conditions following the December holidays.”

“Looking ahead, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” he added.

The BSP issues its own debt paper to absorb excess liquidity in the financial system.

This also allowed the Treasury last Wednesday to raise an additional P5 billion from fresh 10-year bonds through its tap facility window made available to 11 government securities eligible dealers-market makers.

During Wednesday’s regular bond auction, the Treasury fully awarded P35 billion in IOUs maturing in January 2032 at a coupon of 4.875 percent. The outstanding amount for this new bond series stood at P40 billion.