THE BANGKO SENTRAL ng Pilipinas (BSP) fully awarded its offer of short-term securities on Friday as yields went down amid hints of a possible reduction in reserve requirements and lower oil prices.
The central bank awarded P100 billion in 28-day bills as planned as bids for the offer amounted to P165.88 billion, beating the P117.75 billion logged last week.
Accepted rates for the papers ranged from 1.7475% to 1.78%, a narrower band compared to the 1.735% to 1.9279% margin in the previous auction. With this, the average rate of the one-month securities inched down by 1.5 basis points (bp) to 1.7619% from 1.7769% last week.
The BSP bills and the term deposit facility are used by the central bank to gather excess liquidity in the financial system and guide market rates.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said rates of the BSP bills inched down after the central bank said it is open to another cut in banks’ reserve requirement ratios (RRR), which would infuse additional liquidity into the financial system.
The BSP said lowering the RRR remains “on the table”, Bloomberg reported on Wednesday.
The reserve requirement for big banks is currently at 12%, still one of the highest in the region. The central bank last cut big banks’ RRR in April 2020 with a 200-bp reduction.
In July 2020, it likewise slashed the reserve requirements of thrift and rural banks by 100 bps to three percent and two percent, respectively.
The central bank’s easing measures have infused about P2.2 trillion in fresh liquidity into the financial system, equivalent to about 12.1% of gross domestic product.
The Monetary Board will have its next policy-setting meeting on Aug. 12. However, it has adjusted its RRR outside these meetings in the past.
The decline in global oil prices also caused the yields on the BSP securities to drop, Mr. Ricafort added.
Reuters reported that while US crude oil futures picked up on Friday, prices remained on track for their biggest weekly decline since late October due to worries on how restrictions caused by the spread of the Delta variant could affect demand.
US West Texas Intermediate crude futures declined 6.4% this week, the biggest weekly loss since the end of October. Meanwhile, Brent crude oil futures shed 6.5% this week, the most since March. — L.W.T. Noble with Reuters