BSP eyes more CB bill issuances

The Bangko Sentral ng Pilipinas (BSP) is looking at offering more Central Bank bills (CBBs), in a bid to mop up excess liquidity in the country.

According to BSP Governor Felipe Medalla, the BSP is looking at increasing the current volume of sterling facilities from P500 billion to as high as P1 trillion.

“Right now that’s about P500 billion. Nothing prevents us from making that P800 (billion) or even P1 trillion,” he told reporters on the sidelines of the Bankers Night.

“Maybe we can make that P800 (billion), P900 (billion), then when there’s very little liquidity left on speculation, then, of course, the interest rate of the CB bills will rise, but that means very little pesos to borrow to speculate,” he added.

The central bank last Friday offered P140 billion for its 28-day tenor, but the auction was undersubscribed with only P120.5-billion worth of bids or 0.86 times the total offer.

The weighted average interest rate climbed by 17.9216 basis points to 4.7093%, with the accepted yields ranging from 4.528% to 5%.

Medalla said the higher volume of facilities would be a better option than increasing the reserve requirement of banks or the amount of cash a bank must hold in its reserves against deposits made.

“We don’t like non-market friendly ways. Of course, it’s cheaper to just confiscate the money, but that’s not good in the long run, we will issue more CB bills,” he said.

The latest data released by the BSP showed that domestic liquidity or M3 — the broadest measure of money in the financial system — stood at P15.4 trillion in August, up by 6.8% year on year. — DVM, GMA News