Connect with us

Hi, what are you looking for?

News

BSP to turn GS purchasing window into regular facility

BW FILE PHOTO

By Keisha B. Ta-asan

THE BANGKO Sentral ng Pilipinas (BSP) on Monday said it will reconfigure its government securities (GS) purchasing window into a regular liquidity facility under the interest rate corridor (IRC) framework.

“Reconfiguring the GS window into a regular liquidity facility that can operate under normal and crisis conditions ensures consistency with overall monetary strategy,” BSP Governor Benjamin E. Diokno said at his weekly press briefing.

“This is consistent with the BSP’s thrust to develop a broad range of instruments and new operating procedures to fight future crises.”

The central bank started issuing 28-day BSP bills in September 2020, as an additional tool to manage liquidity in the financial system amid the pandemic.

“The issuance of BSP Securities provides an additional monetary tool for implementing monetary policy. It also promotes greater flexibility in managing liquidity in the financial system under the interest rate corridor or IRC framework,” Mr. Diokno said.

The normalization of the BSP’s GS window involves three stages: transition, reconfiguration, and re-launching.

The transition stage includes scaling down its daily purchases in the GS window as it shifts into a standard facility. Nevertheless, the facility could be reactivated if justified by market conditions.

The second stage involves the conversion of the GS window from being a standing facility into an active operation that is consistent with the overall monetary strategy consistent with the IRC framework.

The BSP introduced the IRC system to guide short-term market interest rates towards the central bank’s policy rate. It consists of a rate at which the BSP lends to banks (typically an overnight lending rate) and a rate at which it takes deposits from them (deposit rate).

When the reconfiguration is finished, the BSP will re-launch the government securities outright transactions. Market-sounding activities and technical assistance from international institutions will be included.

“Basically, BSP is just reversing what it did during the pandemic when it flooded the market with excess liquidity. Now that inflation can no longer be ruled out as transitory, BSP’s reconfiguration of its open market operation using GS will have to do the heavier lifting. BSP has to normalize its balance sheet too,” former BSP Deputy Governor Diwa C. Guinigundo said in a Viber message.   

The share of outstanding placements in BSP Securities accounted for 35% of the total amount of system liquidity absorbed by the BSP through its liquidity management facilities as of end-May 2022.

“With the economy in much better shape and at hopefully what is the tail end of the pandemic, BSP opted to close this emergency window as there was less need for such a facility,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

“Any increases in yield are likely tied to other developments such as accelerating inflation or increase government borrowing and normal market trading activity is now taking place.”

Inflation jumped to 5.4% in May, the fastest in three and a half years, as food and fuel prices continued to climb amid the prolonged Russia-Ukraine war.

The BSP last month raised its average inflation forecast for 2022 to 4.6% from 4.3%, exceeding the 2%-4% target.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message these liquidity management tools “provide greater options, leeway, and flexibility to monetary authorities to effectively respond to evolving economic and business conditions and challenges, such as the COVID-19 (coronavirus disease 2019) pandemic/lockdowns.”

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Financial Advisors

The solar PV module market so far has seen commendable growth, with numerous milestones having been achieved in terms of the number of installations,...

News

KARASOLAR.COM TENA, Ecuador — Ecuador’s rainforest Achuar people say their ancestors long dreamed of a “fire canoe” or “electric fish” that would let them...

News

The Cabinet under the next administration is bringing in experienced officials who will be at the forefront of managing and planning the Philippine economy....

News

REUTERS MUMBAI/BUENOS AIRES/LONDON — It only took 24 hours last month for Prime Minister Narendra Modi’s government in India — the world’s second-largest producer...

News

UNSPLASH YAMAGATA, Japan — Japanese farmer Kiyoharu Hirao has started to add more rice to the mix he gives his cattle in order to...

Editor’s Pick

The Institute of Directors has had to investigate allegations about how the lobby group is run. The investigation comes just four years after Lady...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Financial Advisors

The healthcare ecosystem is one that has thrived on the cusp of scientific progress, benefitting enormously from the winds of change in the technological...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.