The Philippine central bank raised P100 billion from its auction of short-term securities on Friday as rates dipped on strong liquidity loans to the government got renewed.
The Bangko Sentral ng Pilipinas (BSP) fully awarded the 28-day bills as total tenders reached P186.61 billion, almost twice as big as the initial offer. Demand was slightly higher than P182.21-billion worth of bids last week.
The debt paper fetched an average rate of 1.784%, 3.8 basis points lower than last week. Banks sought yields of 1.77% to 1.789%, a lower range compared to the 1.795-1.809% a week ago.
“Today’s auction results continue to show market participants’ sustained strong interest in the 28-day bill amid ample liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.
The rates declined anew after the central bank again extended the validity of its P540-billion loan to the National Government, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. said via Viber.
The move meant there was less pressure for the state to borrow locally, which helped government bond yields to ease, he said.
Higher bids in the past auctions showed the market was still awash with cash.
The central bank’s Monetary Board renewed its P540-billion direct advance to the government for the fourth straight time, since the latter started borrowing short-term loans from the central bank in March last year.
The central bank charter allows it to lend a fifth of its average revenue to the government, which is equivalent to P540 billion.
Congress increased the cap to 30% or as much as P850 billion through a stimulus law passed this year amid a coronavirus pandemic.
The government started borrowing from the central bank last year to help finance its pandemic response amid plunging tax collections.
“The BSP’s monetary operations will remain guided by its latest assessment of liquidity conditions and market developments,” Mr. Dakila said. — Beatrice M. Laforga