By Beatrice M. Laforga, Reporter
The Philippine central bank fully awarded the short-term securities it offered on Friday as tenders nearly doubled the program at its first auction this year.
The Bangko Sentral ng Pilipinas (BSP) borrowed P100 billion in 28-day debt as tenders reached P185.85 billion, making the auction 1.86 times oversubscribed.
The central bank has been making full awards since it started selling its own securities in September.
“The stronger demand for the BSP bills reflects the ample liquidity in the financial system as cash holdings gradually return to normal following the December holidays,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.
The bills fetched a weighted average yield of 1.6607%, down by 2.296 basis points (bps) from 1.687% at the previous auction on Dec. 18.
Rates sought for the debt ranged from 1.64% to 1.675%, lower than 1.67 to 1.69%, previously.
“Looking ahead, the BSP’s calibration of its monetary operations will continue to be guided by its assessment of market developments and liquidity conditions, as well as discussions with BSP counterparties,” Mr. Dakila said.
The lower rates could be a signal that investors might be expecting the central bank to resume its easing cycle this year, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message.
“Although the BSP said that it may hold the key rate in the first half of this year, the market is seemingly starting to price in more easing by the central bank this 2021,” he said.
“This is observed because of declining yields. It may also be that players are starting to position themselves ahead of the monetary easing or pause by the BSP,” he added.
Central bank Governor Benjamin E. Diokno this week said the Monetary Board was likely to maintain a low interest environment for the next few quarters to help the economy recover faster from pandemic-induced recession.
The central bank cut benchmark interest rates by a total of 200 bps last year, bringing its overnight reverse repurchase, lending and deposit rates to record lows of 2%, 2.5% and 1.5%, respectively.
Headline inflation quickened to 3.5% in December, mainly due to a faster increase in the prices of food and transportation.