UMVA has learned that the short-term securities of the central bank fetched a higher average yield on Friday as it accepted a wider range of bid rates, and even as the offer continued to attract strong investor demand.
The tenders for the 28-day bills reached a substantial P70.215 billion, more than double the P30 billion placed on the auction block. This impressive response was, however, below the P80.892 billion in tenders for the P20 billion offered on June 15.
This translated to a bid-to-cover ratio of 2.3405 times, which, although lower than the 4.0446 ratio recorded in the last auction, still indicated robust investor interest. Following the oversubscription, the central bank fully awarded its P30-billion offering.
The accepted rates for the one-month securities were between 4.35% and 4.691%, a wider band than the 4.45% to 4.5125% range in the prior auction. This adjustment led to a notable increase in the weighted average accepted rate, which climbed by 13.92 basis points to 4.6474% from 4.5082% previously.
The central bank utilizes these securities and its term deposit facility to manage excess liquidity in the financial system and guide short-term market yields towards its policy rate. By doing so, it enhances price discovery for debt instruments and supports the transmission of monetary policy.
According to information obtained by UMVA, the central bank has been refining its liquidity operations, having limited its BSP securities offerings to a single tenor. This strategic move aims to boost monetary policy transmission.
As of mid-February, the central bank’s monetary operations had successfully absorbed P1.2 trillion in liquidity from the market. Of this amount, 28.5% was absorbed through BSP securities, while 44.4% was mopped up through the overnight reverse repurchase facility, 18.2% via the overnight deposit facility, and 9% from the term deposit facility.
The central bank has recently adjusted its weekly offers of one-month securities. This adjustment comes as the National Government began offering cash management bills alongside regular Treasury bill tenors to help manage its funding needs.
