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Central bank raises P100 billion at auction

The Philippine central bank raised P100 billion from short-term securities it sold at an auction on Friday as rates fell due to easing inflation.

The Bangko Sentral ng Pilipinas (BSP) fully awarded the 28-day bills after getting  P116.024 billion in bids. But the demand was 23% smaller than the P151.5 billion at last week´s auction.

The debt paper fetched an average 1.783%, down by 2.2 basis points from 1.805% last week.

Yields sought by banks ranged from 1.77% to 1.8%, lower than 1.79-1.82% last week.

“The results of the BSP bill auction continue to show that market conditions remain normal amid ample liquidity in the financial system,” central bank Deputy Governor Francisco G. Dakila, Jr. said.

“Moving forward, the BSP’s monetary operations will continue to be guided by its assessment of the latest liquidity conditions and market developments.”

The central bank uses the short-term bills and term deposit facility to mop up excess liquidity in the system and guide short-term interest rates.

Easing prices of goods and services may have pulled down the rates, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

Inflation quickened to 4.5% in April, same as in March but faster than 2.2% a year earlier. This marked the fourth straight month that inflation exceeded the annual 2-4% target of the central bank.

Last month’s inflation was lower than the median 4.7% in an analyst poll by BusinessWorld last week. It was within the BSP’s 4.2-5% estimate.

The final pork tariff rates that the economic team and senators agreed upon earlier this week may have also helped pull down rates, Mr. Ricafort said. 

The move to increase the minimum access volume and lower tariffs for pork imports aims to temper rising meat prices.

Offshore, lower US Treasury bond rates also contributed to easing local bond yields, Mr. Ricafort said.

The rate of the benchmark 10-year Treasury note fell to 1.58% on Thursday from 1.63% at the start of the week.

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