THE BANGKO SENTRAL ng Pilipinas (BSP) fully awarded its offering of one-month securities on Friday even as rates went up slightly following the central bank’s higher inflation forecast for the year.
The BSP awarded P100 billion in the 28-day bills as planned as bids reached P135.73 billion, making the offer oversubscribed by 1.35 times, based on BSP data. However, this week’s tenders were lower than the P140.525 billion in demand logged during last week’s auction.
Accepted rates for the bills ranged from 1.8% to 1.835%, a narrower band compared to the 1.78% to 1.845% recorded last week. This brought the average rate of the 28-day papers to 1.8158%, inching up by 0.49 basis point from the 1.8109% seen on June 18.
The BSP bills and term deposits are used by the central bank to mop up excess liquidity in the financial system and to better guide interest rates.
The uptick in the average yield of the short-term securities was due to the higher inflation forecast of the BSP for 2021, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.
The BSP kept its key interest rate at a record low for a fifth straight meeting on Thursday, as it vowed to maintain an accommodative stance to support economic recovery.
The BSP left the rate on the overnight reverse repurchase facility at 2%, as widely expected by 14 of 16 analysts in a BusinessWorld poll last week.
Interest rates on the overnight deposit and lending facilities were also kept at 1.5% and 2.5%, respectively.
Meanwhile, the central bank raised the inflation outlook for this year to 4% from the previous forecast of 3.9%. This matches the upper end of the BSP’s 2-4% target.
If realized, this would be faster than the 2.6% logged in 2020.
On the other hand, inflation is expected to average 3% for 2022 and 2023.
Headline inflation stood at 4.5% in May, For the first five months of the year, it averaged at 4.4%. — L.W.T. Noble