BSP’s first auction under IRC oversubscribed

MACTAN, Cebu—Tenders made by banks exceeded the P305 billion offered by the Bangko Sentral ng Pilipinas  for its first-ever auction of overnight reverse repurchase (RRP) facility under the implementation of the interest rate corridor (IRC).

BSP Deputy Governor Diwa C. Guinigundo told reporters Friday night that total tenders reached P574.072 billion, as banks swarmed one of the two auctions under the IRC aimed at mopping up excess liquidity and tempering volatility in market rates by moving them toward the policy rate.

The P305-billion offering last Friday was based on the BSP’s liquidity forecast for that day, Guinigundo said. The daily amount of overnight RRP to be auctioned off will vary depending on the day’s specific liquidity forecast.

The auctions for overnight RRP, with a fixed rate of 3 percent, will be held Monday to Friday, with results to be made available in the afternoon. All offers will be fully awarded, as the facility lacks collateral.

Also last Friday, the scheduled adjustment in key rates was implemented by the BSP—the overnight lending facility, the upper bound of the corridor, was cut to 3.5 percent from the former repurchase (RP) facility of 6 percent; the policy rate, meanwhile, was slashed to 3 percent from the previous RRP facility of 4 percent.

The BSP kept the overnight deposit facility or the former special deposit accounts (SDA) rate of 2.5 percent, which serves as the lower bound of the corridor.

On June 8, the BSP will hold its first weekly auction for the term deposit facility (TDF).

The BSP will offer seven-day TDF worth P10 billion and 28-day TDF amounting P20 billion.

The succeeding auctions on June 15, 22 and 29 will offer the same two tenors. A volume worth P30 billion will be offered at next week’s auction, according to the BSP.

The TDF will be auctioned off using variable-rate, multiple price tenders through the BSP’s Monetary Operations System (MOS). Ben O. de Vera