The Bangko Sentral ng Pilipinas plans to issue securities in the third quarter after all the requirements and infrastructure needed to support the undertaking are in place, Governor Benjamin Diokno said Wednesday.
The BSP and the Bureau of the Treasury signed on July 1 an agreemen to link the BSP’s Monetary Operations System and the BTr’s National Registry of Scripless Securities.
The signatories were Diokno and National Treasurer Rosalia de Leon. Finance Secretary Carlos Dominguez III was also present during the signing.
Diokno said in a virtual briefing the BSP charter does not impose limits on the volume of the issuance of the securities.
“But the BSP will consider market preference and the prevailing liquidity conditions,” he said.
The initial amount of issuance will be based on the BSP’s liquidity forecast, beginning with relatively small auction volume to make sure counterparties will be familiarized before scaling up going forward.
It said the volume and tenor would be announced in advance, just like what is done in the term deposit facility auction.
When asked on the frequency of the securities issuance, Diokno said it would depend on the market appetite and liquidity conditions.
“The BSP and the Bureau of the Treasury will coordinate regularly so that there will be no overlapping in terms of schedule,” Diokno said.
Diokno said the priority will be given to the borrowing needs of the national government and the BSP “will not compete with the government.”
He said the objective of the BSP securities issuance was different from the securities issued by the government whose primary purpose is to raise funds to be used for the spending requirements of the state.
“The BSP securities issuance aims to manage the liquidity in the financial system to support the monetary policy transmission,” Diokno said. He said the market reception of the planned issuance so far was generally positive.
The connectivity of the BSP’s MOS to the BTr’s NRoSS is an integral part of the process for the issuance of BSP securities.
The MOS is a web-based electronic platform that enables counterparties to participate in the BSP’s peso liquidity facilities.
The NRoSS of the Treasury is an electronic registry system for government securities and facilitates the settlement and recording of transfers of GS through an established interface with the trading platform for secondary market trades and the BSP’s Philippine Payment and Settlement System.
The MOS-NRoSS linkage will facilitate the seamless process of the auction of BSP-issued securities and the registry and recording of these securities to enable primary market issuance and secondary market trading.
Diokno said the issuance of the BSP securities is an additional instrument in the implementation of monetary policy under the interest rate corridor framework. The use of BSP securities for liquidity management also supports the BSP’s initiative to shift to more market-based monetary operations and allows the BSP to conduct its monetary operations in line with international central banking practice.
The amended BSP charter restored its ability to issue its own securities. “It took many years to finally amend the BSP Charter and with it, restore the BSP’s authority to issue its own freely negotiable securities. Thus, the prospect of an additional market-friendly instrument in the BSP’s policy toolkit is something to look forward to as we continuously enhance our monetary policy implementation and liquidity management under the interest rate corridor framework,” Diokno said.