Monetary Operations under the Interest Rate Corridor Framework
Overnight RRP Facility
In a repurchase transaction, the BSP buys government securities (GS) from a bank with a commitment to sell them back at a specified future date at a predetermined rate, resulting in an expansionary effect on liquidity. Conversely, in a reverse repurchase (RRP) operation, the BSP also acts as the seller of GS and the bank’s payment to the BSP has a contractionary effect on liquidity.
The existing RRP facility is an overnight facility and will be offered using a fixed-rate and full-allotment method, where individual bidders are awarded a portion of the total offer depending on their bid size. Fixed-rate, full allotment method will help ensure that the overnight rate sits close to the BSP policy rate.
The table below presents the features of the O/N RRP facility.
|Frequency of operations||Daily (5 days a week)|
|Auction type||Fixed-rate, full allotment|
|Auction size||Based on BSP liquidity forecast|
|Announcement of auction size||Weekly|
|Auction time||5:00 PM (Open); participants can start submitting bids at 4:30 PM|
|Auction time window||30 minutes|
|Eligible counterparties||Banks and NBQBs|
|Type of allocation||Pro rate based on bid size|
|Minimum bid amount||P10 million|
|Maximum bid amount||20% of auction size|
|Maximum no. of bids||One (1)|
|Announcement of results/settlements||Same day|