BSP to launch its debt papers in Q1

MANILA, Philippines — The Bangko Sentral ng Pilipinas is planning to conduct market sounding activities to determine the market’s preferences in relation to the BSP’s planned issuance of securities in the second quarter of 2020.

In a press briefing, BSP Governor Benjamin Diokno said the central bank is set to soft launch its own debt papers in the first quarter of the year, with the formal issuance slated in the second quarter.

In preparation for this, the BSP will conduct market sounding exercises within January to March, to figure out investor preferences in terms of volume and tenor, Economic Research director Dennis Lapid said.

“We will be discussing with counterparties the features of the new securities just to get an idea on their preferences,” Lapid said.

The BSP is also working with the Bureau of the Treasury (BTr) to ensure that its own system will work seamlessly with the National Registry of Scripless Securities (NRoSS), he also said.

The NRoSS is an online centralized electronic registry for dematerialized fixed income securities. It helps facilitates the electronic transfer of securities for trade and non-trade transactions.

Last February, President Duterte signed Republic Act 11211 or an act amending RA 7653, otherwise known as the New Central Bank Act. The law removed the condition which stated that the BSP could only issue certificates of indebtedness in cases of extraordinary movement in price levels.

This gave the BSP an expanded toolkit as its authority to issue debt papers as part of its operations was  restored. The new law also raised the capitalization of the central bank to P200 billion from the current P50 billion.

BSP Deputy Governor Francisco Dakila Jr. said earlier the issuance of the securities would continue to be within the interest rate corridor (IRC) framework.

The BSP adopted the framework to guide short-term market rates toward the central bank’s policy rates. It is intended to help ensure that money market rates move within a reasonable close range around the BSP’s policy rate.

The planned securities issuance would give the central bank additional instruments on top of the term deposit auction facility (TDF) with tenors of seven, 14, and 28 days, Dakila said.

The proposed tradeable securities will have an advantage over term deposits in terms of pricing.

There will also be regularity in terms of the issuance of the proposed securities just like the term deposits wherein there is a quarterly calendar and the volume would be announced in a short period of time before the scheduled auction.