Authorities study possible enhancements on BSP securities

Philippine monetary authorities are considering the inclusion of more eligible participants that will be allowed to take part in the central bank’s securities auctions as demand for government-issued paper continues to remain high.

In a virtual briefing Thursday, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno cited the strong demand during the weekly BSP bills auction.

Since its initial offering on September 18, 2020 until December 28, 2020, total subscription for BSP bills amounted to around PHP1.52 trillion, around 1.7 times the PHP890-billion total offering.

As of December 2020, outstanding placements in BSP securities amounted to around PHP259.7 billion.

“Said amount accounts for 14.2 percent of the total amount of system liquidity absorbed by the BSP through its liquidity management facilities,” Diokno said.

In 2020, BSP implemented a total of 200 basis points reduction in the central bank’s key policy rates to encourage more lending among banks and help cushion the impact of the pandemic on the domestic economy.

The final rate cut last year was made in November amounting to 25 basis points.

Following the reduction, Diokno said the rate of the 28-day BSP bill also went down near the 1.5-percent rate of the overnight deposit facility rate, which is the floor of BSP’s interest rates corridor.

Similarly, rates of the seven- and 14-day term deposit facility (TDF) also decreased along with that of the 91-day Treasury bill (T-bill) issued by the Bureau of the Treasury (BTr).

With these developments, Diokno said monetary authorities continue to study BSP securities’ features to ensure these remain market-friendly and to determine the possibility of expanding the existing set of eligible market participants as well as market preference and sentiments.

“Moreover, the decision on the BSP securities tenors to be offered, issuance size, and frequency of issuance will be guided by the BSP’s assessment of market and liquidity conditions,” he added.

Source: Philippines News agency

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