Market shows appetite for fresh term deposits

Tenders for the term deposits issued by the Bangko Sentral ng Pilipinas (BSP) Wednesday were more than double the offered volume even as the rate for the one-month facility inched up.

Banks and trust institutions’ total bids reached P262.5 billion, exceeding the P130-billion offering at the first term deposit facility (TDF) auction in November.

This month’s total volume was hiked from P110 billion in October, as the 28-day facility was increased to P120 billion from P100 billion previously.

For the P10 billion in seven-day term deposits, tenders amounted to P29.7 billion at a yield of 2.5-2.525 percent.

As for the 28-day tenor, the BSP received P232.8 billion in bids. The accepted yield for the one-month facility slightly rose to 2.5-2.75 percent from 2.5-2.7 percent last week.

The BSP will again offer P130 billion each for the next two TDF auctions on Nov. 9 and 16.

Operational adjustments had been implemented by the BSP ahead of the implementation of the interest rate corridor (IRC) aimed at bringing market interest rates closer to the policy rate and mopping up excess liquidity in the system.

SDA rate

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.

Despite sustained interest in the BSP’s TDF auctions, BSP Governor Amando M. Tetangco Jr. said in a text message to reporters last week that “current conditions still do not warrant adjusting the RRR,” or the reserve requirement ratio.

“Liquidity remains non-inflationary. While we do not have a pre-set level of target auction average rates to trigger action, we would like to see more migration to TDF before we consider adjustments in the RRR,” Tetangco said.

Tetangco had noted “recent auctions showed that [the market is] becoming more familiar with the IRC system and are responding positively to higher auction sizes.”

“You can expect further upward adjustments to the auction sizes. The objective is to siphon off a sufficient amount of liquidity such that the gap between the policy rate and the term auction rates would have narrowed and are more closely aligned,” Tetangco had said.

Also, “together with refinements in auction sizes, we will continue to implement the agreed phase-out of access by trust entities to the overnight deposit facility (ODF) and TDF windows by June 2017,” he added.

Tetangco had said the BSP has been seeing gains in mopping up excess liquidity in the system through the weekly TDF auctions.

BSP Deputy Governor Diwa C. Guinigundo also said earlier the BSP was seeing three more months before interest rates move more decisively toward the policy rate.