BSP to consult market on bond issuance

The central bank will begin consulting the banking industry on their future bond sale to prepare the market and to acquaint them of the proposed roadmap on these issuances.

“We will be conducting market-sounding exercises, we will talk to banks and the business community, on the more acceptable instruments to them,” said Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo.

Guinigundo said banks will be consulted on tenors and timing, to ensure that BSP bills or bonds will not interfere or compete with debt securities issued by the Bureau of the Treasury (BOT).

At this point, everything is still preliminary, the BSP official said. “We have to discuss the maturity and the amount. So everything is still preliminary at this point. And, once we get the details ironed out, we will first roll this out to the Monetary Board to allow us to do market-sounding exercises.”

The BSP currently has four open market operations – the overnight deposit facility, reverse repurchase facility which is the overnight policy rate, the overnight lending facility, and the term deposit facility.

“On top of that now, we have the authority to issue debt securities,” said Guinigundo. The bond issuances will serve as collateral to the RRP, among other things. The weekly TDF auction will just be used for finetuning market rates.

Earlier, National Treasurer Rosalia V. De Leon said talks to establish a memorandum of agreement (MOA) with the BSP has begun, even before the BSP charter was amended, restoring its authority to issue debt securities.

De Leon said she and Guinigundo are currently discussing “which part of the curve they (BSP) will be issuing (bonds).”

The amended New Central Bank Act was signed into law last February 14, as Republic No. 11211.

The restoration of the authority to issue central bank debt papers empowers the BSP to use this instrument particularly during times when there are structural surplus liquidity.

For the years that BSP could not issue its own debt papers, there was an agreement between the central bank and the National Government that since only the government could tap the bonds market, the BSP will concentrate on the loans market.

Guinigundo has said that the BSP bonds which will be negotiable and marketable may be called the “Monetary Stabilization Bonds” when it is issued in the future.

He said its impact on the capital market will be significant and that it will be a “critical element” in its development.