BSP bills undersubscribed on RTBs
THE CENTRAL BANK sold P99.05 billion in one-month securities on Monday, below its program due to the government’s ongoing offer of retail Treasury bonds (RTBs) and expectations of quicker inflation.
Demand for the 28-day bills offered by the Bangko Sentral ng Pilipinas (BSP) on Monday was lower than the P100 billion on the auction block and the P148.81 billion in bids seen on Feb. 9. The auction was suspended last Friday in view of the Lunar New Year holiday.
This is the first time the BSP bills were undersubscribed since the weekly offerings started in September.
Accepted yields for the one-month securities were seen from 1.603% to 2%, a wider band compared with the 1.6% to 1.6235% logged in the previous auction.
With this, the average rate for the papers settled at 1.6402%, higher by 2.78 basis points than the 1.6124% recorded on Feb. 5.
“The very slight undersubscription in the 28-day bills auction reflects market participants preference for shorter tenors in view of the Bureau of the Treasury’s scheduled settlement for the retail Treasury bonds on March 9,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.
The government last week sold an initial P221.218 billion in three-year retail Treasury bonds on strong investor demand due to robust liquidity in the market.
Bids for the retail papers maturing in 2024 offered by the Bureau of the Treasury at the rate-setting auction for the bonds reached P284.183 billion, well above the initial plan to raise at least P30 billion.
The three-year retail bonds fetched a coupon rate of 2.375%. The government is set to sell the RTBs until March 4 but can close the offer period earlier.
The 28-day BSP bills and term deposits are tools used by the central bank to gather excess liquidity in the financial system and to better guide short-term market interest rates.
Aside from the RTB offering, expectations of faster inflation may have also led to the undersubscription and the higher yields seen for the BSP’s 28-day securities, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
Headline inflation spiked to 4.2% in January from 3.5% in December due to the continued increase in food and pump prices. The central bank last week raised its average inflation forecast for the year to 4% (from 3.2%), citing upside pressures from food, oil, and non-oil price hikes.
Even so, the central bank kept its policy settings steady at its review last week, maintaining the rates on its overnight reverse repurchase, lending, and deposit facilities at 2%, 2.5%, and 1.5%, respectively. — L.W.T. Noble