The Bangko Sentral ng Pilipinas (BSP) said it raised P77.45 billion via the issue of short-term securities Friday, with the auction undersubscribed as rates continued to increase.
The BSP accepted all bids for the 28-day bill offer but fell short of its target to issue P80 billion. Demand declined from the bids of P106.674 billion recorded during the previous auction.
The average rate rose 14.4 basis points (bps) to 1.944% from the previous auction.
Investors sought yields of between 1.84% and 2.15%, against the range of 1.725-1.95% last week.
The increase in rates was within expectations due to high inflation, BSP Deputy Governor Francisco G. Dakila said in a statement.
“Nevertheless, financial system liquidity remains ample. Up ahead, the BSP’s monetary operations will continue to be guided by its assessment of the latest liquidity condition and market developments,” Mr. Dakila said.
The Philippine Statistics Authority (PSA) reported headline inflation of 4.7% last month, picking up from 4.2% in January and 2.6% a year earlier. Last month’s inflation was the highest reading since 5.1% in December 2018.
This brought the two-month average to 4.5%, above the central bank’s 2-4% annual target.
Both the BSP securities and term deposits are used by the central bank to mop up excess liquidity in the financial system and to better guide short-term market rates.
The lower-than-target proceeds could be due to the issue of three-year retail Treasury bonds (RTBs) on March 9, which sapped demand for securities, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message Friday.
Mr. Asuncion said the lack of demand drove rates higher in order to attract buyers seeking yield.
The government raised P463.3 billion worth of RTBs last week, consisting of P411.8 billion in fresh funds and P51.5 billion from switch subscriptions.
This was the Treasury’s second-biggest RTB sale in history, following the record P516.3 billion in five-year bonds issued last year. — Beatrice M. Laforga