BSP eyes larger volume for term deposit offer

THE BANGKO Sentral ng Pilipinas (BSP) is looking to increase the volume of its hit term deposit facility (TDF) offered to banks amid the US Federal Reserve’s decision to keep current interest rates.

“The Fed standing pat on rates was expected by the market. But that the policy path chart reflected a more dovish stance was new,” BSP Governor Amando M. Tetangco Jr. said in a text message to reporters. The US Fed on Thursday morning (Manila time) kept interest rates unchanged while also signaling fewer hikes in the future.

Tetangco said this meant “more room for emerging market economies’ [financial] markets, including in the Philippines, to remain supported.”

The term deposits were being auctioned off under the interest rate corridor (IRC), aimed at mopping up excess liquidity and tempering volatility in market rates by moving them toward the policy rate of 3 percent.

Tetangco said the Monetary Board would consider international and domestic factors to see if “there was a need to adjust policy settings including the amount of liquidity to be siphoned off in the succeeding TDF auctions.”

The United Kingdom’s decision next week on whether  to stay as a member of the European Union, or the so-called Brexit, would also play a big part in the policy decisions of governments across the world, including the Philippines.

Last week, Tetangco already said the BSP “will make adjustments to the amount of the TDF auctions as conditions warrant.” BSP officials also planned to increase the frequency of the auctions from once to twice weekly.

The first two TDF auctions were both oversubscribed. The maiden auction last week reached bids of P199.7 billion, while the latest on Wednesday garnered P156.8 billion bids.

The BSP offered a total of P60 billion term deposits during the first two auctions. The yield for the term deposits was steady at 2.5 percent for both auctions.

The BSP would again be offering P10 billion worth of seven-day term deposits and P20 billion worth of 28-day deposits each on June 22 and 29.