The Philippine central bank raised P110 billion at the auction of its short-term debt paper on Friday, even as rates rose on higher US Treasury yields.
The Bangko Sentral ng Pilipinas (BSP) fully awarded the 28-day debt as bids reached P135.1 billion. The auction was 1.23 times oversubscribed, while demand was bigger than P120.9 billion at last week’s auction.
The bills fetched an average rate of 1.7746%, higher than 1.7739% a week earlier. This marked the first uptick in the rates of BSP securities after eight straight weeks of decline.
The asking range of banks fell to 1.7525-1.79% on Friday from 1.7625-1.8%.
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.
“The results of the BSP bill auction remain in line with the BSP’s view that market conditions remain normal and financial system liquidity continues to be ample,” central bank Deputy Governor Francisco G. Dakila, Jr. said in a statement.
Offshore developments may have pushed the rates up, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.
He said the local rates reacted to the higher US Treasury yields amid growing inflation concerns and hints from the Federal Reserve of a possible tapering of its bond-buying program.
Benchmark 10-year US Treasury yields hit 1.68% on Wednesday and eased to 1.63% on Thursday, based on the latest data from the US Treasury department.
Some US policymakers have said the US central bank might have to start talking about reducing its bond purchases at some point, Reuters reported, citing minutes of the Federal Reserve’s April meeting released this week.
The rise in yields might have also been due to the loosening of quarantine restrictions in Metro Manila and nearby provinces until the end of May, Mr. Ricafort said.
Metro Manila, Bulacan, Cavite, Laguna and Rizal were placed under a general community quarantine from May 15 to May 30.
“Looking ahead, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” Mr. Dakila said.