BSP to issue debt papers in Q2 2020

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is now looking at issuing its own debt papers in the second quarter of 2020 to strengthen the regulator’s money operations aimed at influencing the underlying demand and supply conditions.

BSP Deputy Governor Francisco Dakila Jr. said the BSP is coordinating with relevant agencies in setting up the required infrastructure for the primary market issuance and secondary market trading in preparation for the planned issuance of tradeable BSP securities.

“The BSP intends to commence the issuance of tradeable BSP securities by the second quarter of 2020,” Dakila told The STAR.

He said the BSP is considering offering tenors that are longer than the maximum tenor offered in the term deposit auction facility (TDF), depending on prevailing liquidity conditions and market preferences at the time of implementation.

The liquidity absorption facility launched as part of the interest rate corridor (IRC) framework currently offers seven, 14, and 28-day term deposits.

Moreover, Dakila said the maturities and timing of issuance of BSP securities would be closely coordinated with the Bureau of the Treasury (BTr) to ensure that the issuance does not directly compete with the issuance of the national government.

Monetary authorities plan to conduct market sounding exercises after President Duterte signed Republic Act 11211 or an act amending RA 7653 otherwise known as the new central bank act last February.

The amended BSP charter removed the condition that the issuance of certificates of indebtedness will be made only in cases of extraordinary movement in price levels.

Monetary operations of the BSP refer to the buying or selling of government securities, lending or borrowing against underlying assets as collateral, acceptance of fixed-term deposits, foreign exchange swaps, and the use of other monetary instruments of the central bank aimed at influencing the underlying demand and supply conditions.

The law also raised the capitalization of the BSP to P200 billion from the current P50 billion.

Dakila said the restoration of the BSP’s ability to issue its own debt securities under the amended BSP Charter provides the central bank with an additional monetary instrument for managing liquidity in the financial system.

“The issuance of BSP securities will be particularly useful in absorbing liquidity that is structural in nature, such as liquidity arising from persistent large capital flows or liquidity released from reducing the reserve requirements over the medium term,” Dakila said.

The central bank was originally looking at issuing its own debt papers this year.