Monetary Operations under the Interest Rate Corridor Framework
Overnight RRP Facility
Reverse repurchase (RRP) operation refers to the BSP’s monetary policy instrument where the BSP sells government securities (GS) to participating entities in the RRP facility with a commitment to buy it back at a specified future date and at a predetermined rate. RRP participants’ payment to the BSP results in a contractionary effect on financial system liquidity.
For the period 3 June 2016 to 13 July 2023, the overnight RRP facility was operated using fixed-rate and fixed-volume auction format. The interest rate was fixed at the policy rate of the BSP while the volume offering was typically fixed at P305 billion. Banks submitted bid amounts and the BSP awarded on a pro-rated basis the offered volume to all participants whenever the auction was oversubscribed.
Starting on 14 July 2023 until 7 September 2023, the overnight RRP facility was offered using a fixedrate full-allotment method, wherein all bids received from BSP counterparties are accepted or awarded.
Beginning on 8 September 2023, the overnight RRP facility is offered using variable-rate tenders, multiple price auction format. Under a variable-rate RRP auction format, the BSP announces an offer size based on its forecasts of excess system liquidity. Participating institutions to the overnight RRP facility submit bids for both the amount of funds and the interest rates at which they are willing to place said funds with the BSP. The BSP reviews the bids received and determines the successful bids to award.
The variable-rate RRP auction format has the following key features:
|
Feature |
Details |
| Maturity | Overnight
|
| Frequency of operations | Daily (on business days) |
| Auction time | 11:30 AM – 12:00 PM; submission of bids commences at 11:30 AM
|
| Availability of auction results | 12:10 PM onwards |
Auction format and pricing
| Variable-rate tender, multiple price auction
|
Auction size
| Determined based on the BSP’s forecast of excess liquidity
|
| Announcement of auction size | Daily announcement on the BSP’s Monetary Operations System prior to each operation (at least one hour before the auction) |
| Minimum bid amount | P10 million |
Eligible counterparties
| Banks and Non-Banks with Quasi-banking Functions
|
