Bangko Sentral ng Pilipinas. INQUIRER.net FILE PHOTO
Yields on the central bank’s short-term debt instruments spiked higher during the first auction after last week’s monetary policy tightening — an indication that financial institutions expect another rate hike in the future.
Amid the higher rates, banks’ demand for the term deposit facility rose to its higher level in recent weeks, with tenders totaling P129.7 billion for the only P80 billion on offer.
The Bangko Sentral ng Pilipinas made full awards on the 7-, 14-, and 28-day instruments, meant to help contain inflation by siphoning off idle cash circulating in the local financial system.
During Wednesday’s auction, 7-day facility drew P64 billion worth of tenders from banks, with the BSP making a full award of P40 billion at an average yield of 3.5123 percent. This marked a larger increase over the 3.4273 percent of the previous week compared to relatively narrower yield increments in previous weeks.
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The spike in yields follows a statement made by BSP Governor Nestor Espenilla Jr. last week that regulators will maintain its current policy of allowing yields on the term deposit facility to rise, saying an upward adjustment in its inflation-fighting tool is a normal consequence of last week’s hike in the key policy rates.
The 14-day instrument was also oversubscribed with banks tendering P44 billion in bids for the P30 billion on offer. Regulators made a full award with the yield rising to 3.5855 percent from the previous week’s level of 3.4551 percent.
