BSP’s term deposit offer attracts few takers

The one-month term deposits offered by the Bangko Sentral ng Pilipinas Wednesday were undersubscribed ahead of the expected high demand for cash during the Christmas holidays.

As such, the BSP also partially awarded the 28-day term deposit facility (TDF), as only P113.911 billion was awarded out of the P137.462 billion tendered for the P150-billion offering. The accepted yield was within the range of 2.5-3.5 percent.

The seven-day TDF, meanwhile, was oversubscribed as bids totaled P64.538 billion for the P30 billion offered by the BSP. The one-week facility was fully awarded at an accepted yield of 2.95-3.075 percent.

The BSP’s TDF auctions on Dec. 1 and 14 were also undersubscribed, the first two instances since weekly auctions were started in June, as BSP Governor Amando M. Tetangco Jr. had noted that banks were holding on to cash for the holiday season.

“Because it’s Christmas season, banks would want to have a sufficient liquidity buffer so that in case there is a sudden demand from their clients, they can immediately respond to that,” Tetangco said.

For the last auction of the year on Dec. 28, the BSP will again offer P180 billion in term deposits.

For the first TDF auction in 2017 scheduled on Jan. 4, the BSP will offer P30 billion in seven-day on top of P150 billion in 28-day term deposits.

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.

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’s rate of 2.5 percent, which serves as the lower bound of the corridor.

By the middle of next year, trust entities will no longer have access to the BSP’s deposit facilities.