The Philippine central bank raised 100 billion pesos on Friday from its auction of 28-day notes, with interest rates hiked following restrictive signals from the US Federal Reserve.
Bangko Sentral ng Pilipinas (BSP) fully awarded the short-term bills of exchange, with demand reaching Pesos 102.042 billion, less than at the previous auction.
The banks were aiming for yields of 1.76% to 2.09% – more than the previous week – and raised the average interest rate on the one-month bills by 10.5 basis points to 1.8749%.
The central bank uses its short-term securities and time deposit facility to absorb excess liquidity in the financial system and to manage market interest rates.
Auction yields on the GNP securities rose as Fed officials reiterated their more restrictive stance on reducing bond purchases, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
Fed chairman Jerome J. Powell said Wednesday they would hasten a cut in bond purchases, adding that the Fed would keep inflation in check, Reuters reported.
“We have seen that the factors causing higher inflation are more persistent,” he told the House of Representatives Financial Services Committee on Wednesday. “Politics has adapted to this and will continue to adapt.”
Mr Powell said the Fed could cut asset purchases in a few months.
Mr. Ricafort also attributed the higher yields on central bank securities to the recent sale of 5.5-year government bonds valued at 360 billion pesos.
The proceeds from the issue would finance the pandemic response and the government’s stimulus package, the Treasury Department said. – Luz Wendy T. Noble