Further hike in the volume of term deposit facility (TDF) being offered by the Bangko Sentral ng Pilipinas is likely as Wednesday’s auction was again oversubscribed.
Banks and trust institutions Wednesday tendered almost P196 billion—P162.6 billion for the P80 billion worth of 28-day term deposits, and P33.3 billion for the P10-billion seven-day facility offered.
For the 28-day facility, the BSP accepted yields ranging from 2.5 to 2.525 percent, while the accepted yield remained at 2.5 percent for the seven-day offering.
“The results of the auction today are not unexpected. There is room to further increase the auction size going forward so that more funds could migrate from the ODF (overnight deposit facility) to the TDF,” BSP Governor Amando M. Tetangco Jr. said in a text message to reporters.
“An adjustment in the RRR can be considered down the road when, among others, more funds have migrated to the TDF and if credit conditions warrant,” Tetangco added, referring to the reserve requirement ratio.
Tetangco last week said the BSP had been seeing gains in mopping up excess liquidity in the system through the weekly term deposit facility auctions as part of the implementation of the interest rate corridor.
BSP Deputy Governor Diwa C. Guinigundo also last week said the BSP saw three more months before interest rates move more decisively toward the policy rate.
Since June, the BSP has been holding weekly TDF auctions under the IRC, aimed at mopping up excess liquidity and tempering volatility in market rates by moving them toward the policy rate of 3 percent.
The BSP had made operational adjustments ahead of the implementation of the IRC.
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, while the policy rate or reverse repurchase (RRP) facility had been converted into overnight, with its rate cut 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.
The BSP will also offer a total of P90 billion—P10 billion in seven-day term deposits and P80 billion in 28-day—on Sept. 14 and 21, the latest advisory on its website showed.