Philippine Central Bank Reassures Investors Over Bond Buying

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

The Philippine central bank has reassured investors that its government bond-buying program that started in March is legal and won’t create risks to the economy, Governor Benjamin Diokno said.

“If there’s one question, it’s about the repurchase agreement with the government, and I explained to them that it’s allowed by law,” Diokno said in an online briefing Thursday, when asked what concerns about the Philippine economy are typically raised during investor calls.

Along with many emerging-market peers, Bangko Sentral ng Pilipinas has unleashed a wave of easing measures to bolster an economy ravaged by the coronavirus pandemic. This is the first time the central bank is buying government bonds since the move was allowed under its 2019 charter — which has helped reverse an increase in bond yields.

Investors “know that there’s very strong coordination between the executive branch and central bank,” Diokno said. “They know that we have a lot of monetary and fiscal space, and we’re willing to use them if things go from bad to worse.”

The BSP, which bought 300 billion pesos ($6 billion) of bonds from the government in March, is open to raising the current ceiling, which will require changing a law, Diokno said this week. The cap is 20% of the government’s average revenue in the last three years, equivalent to about 540 billion pesos.

Meanwhile, BSP purchases in the secondary market this week alone are estimated at 50 billion pesos, according to traders from banks including Rizal Commercial Banking Corp.

Diwa Guinigundo, the central bank’s deputy governor from 2005 to 2019, cautioned against prolonged excess liquidity, saying it could boost inflation and weaken the currency, particularly when the economy starts to recover.

“Now they can be self-confident because domestic demand is quite weak, so inflation may remain under control,” Guinigundo, who is retired, said in an interview. The central bank “will have to be prepared to unwind in the future by aggressively mopping up all that liquidity as necessary.”

Diokno has said measures the BSP has taken, including lowering its benchmark interest rate and reserve requirement ratios, have freed up 1.1 trillion pesos in liquidity. Bond-buying activities in the secondary market account for just a “small” portion of the total, he said.

“It is the release of liquidity that has really calmed bond markets,” said Paul Raymond Favila, head of markets and securities services at Citigroup Inc. in Manila. “Buying, though, has the most direct impact to the bond market of all the tools they are using.”

This article was originally posted on finance.yahoo.com/news/.

Home of Science
Follow me

- Advertisement -

Discover

Sponsor

Latest

Why You Need A Business Plan Template

Why You Need A Business Plan TemplateIf you are a small business owner, the first thing you need to do is consider the use...

Next coronavirus aid package may not pass Congress until June as battle lines harden

The battle lines are hardening over Washington’s next legislative response to the coronavirus crisis, with top Democratic lawmakers calling for another big spending package...

One of the Most Successful Television Personality – a Closeup Look at Oprah’s Personal Affair

One of the Most Successful Television Personality - a Closeup Look at Oprah's Personal AffairI love Oprah Winfrey. It is interesting that Oprah...

American Airlines CEO quells U.S. bankruptcy talk, says demand improving

View photos Boeing 737 jet sits at a gate at Washington's Reagan National airport with U.S. Capitol building in the background in Washington More American Airlines Group...

Seven Tips That Will Help You Get A Top Notch Job

Seven Tips That Will Help You Get A Top Notch JobSo many people are still looking up to Oprah for some sense of...
Home of Science
Follow me