The Bangko Sentral ng Pilipinas (BSP) has raised the volume of its securities facility by P10 billion to P110 billion for the first time in four months or since April this year.

Peso bills

The auction of 28-day BSP bills on Friday attracted P148.05 billion against the new offer size of P110 billion. Bids were slightly more than P144.79 billion of August 27.

“The BSP bill auction was awarded in full amid strong interest from market participants,” said BSP Deputy Governor Francisco G. Dakila Jr.

Dakila also said that the auction results are as expected and “in line with the view that market conditions remain stable amid sustained ample liquidity in the financial system.”

The P148.05 billion tenders is equivalent to 1.35x the offering, said Dakila. The bid coverage ratio dropped to 1.3459 from 1.4479 last week.

In the meantime, the average rate for the 28-day securities fell to 1.7194 percent compared to 1.7211 percent last week.

“The weighted average interest rate continued to decline from last week’s rate, settling slightly lower by 0.167 bp (basis points) to 1.7194 percent. The yields accepted remained broadly unchanged with a range of 1.7125-1.7275 percent,” said Dakila.

In January this year, the volume of the BSP securities facility was raised to P100 billion from P80 billion in December 2020. The highest offer for this year, so far, was at P120 billion in February. This was reduced to P70 billion in March when the government reimposed the first strictest lockdown in 2021 due to the resurgence of the COVID-19.

When the BSP bills auction was introduced in September 2020, it had a small volume of P20 billion.

Mopping up liquidity via the BSP’s open market facilities and auctions such as the BSP bills and the term deposit facility help manage and control inflation.

The BSP recently raised the inflation forecasts for 2021 to 4.1 percent, and 3.1 percent for 2022 and 2023. The previous forecasts was four percent for 2021, and three percent for the next two years.

BSP Governor Benjamin E. Diokno said Thursday that inflation expectations remain well-anchored over the medium term.

“The BSP will continue to ensure that policy responses will not lead to excessive inflation and trigger financial stability risks. When domestic developments warrant a recalibration or withdrawal of policy support, the BSP will ensure a smooth normalization of its time- and state-bound measures,” said Diokno.

Source: Manila Bulletin (