Short-term BSP securities urged

Banks prefer Bangko Sentral ng Pilipinas (BSP) securities with short-term maturities of up to two months, according to its highest-ranking official.

Governor Benjamin E. Diokno said that based on the results of the market sounding exercises conducted by the BSP, banks have shown “strong market preference for tenors within the rates of up to two months.”

Part of proposed tenors for the BSP securities, both bills and bonds, was for a term of one year which is the tenor that the BSP and the Bureau of the Treasury have previously agreed on as a compromise.

On September 18, the central bank issued its first 1-month or 28-day BSP Bills after it restored its authority to sell securities last year with Republic Act No. 11211 or the amended BSP Charter.

The auction of BSP term deposit facility (TDF), offered in 7-day, 14-day and 28-day tenors will continue to complement the securities facility.

The 28-day BSP Bills, in the meantime, were priced closed to the 28-day TDF rate. Usually, central bank securities are offered with the shorter segment of the yield curve while bonds have longer maturities.

It is also important that BSP securities will not overlap with BTr-issued government securities. The BTr offers tenors in 91-day, 182-day and 364-day securities.

Diokno said the results of the initial September 18 auction were consistent with market expectations of strong demand prior to the bidding auction as the market remains liquid.

The BSP has no intention of cancelling the TDF tenors, added Diokno. “The issuance of BSP securities does not imply the BSP’s TDF will be phased out. The TDF shall remain in the BSP toolkit and shall be used as a fine tuning instrument along with the RRP (reverse repurchase) facility which may be used to deal with short-term fluctuations in the system liquidity,” he said.