First BSP deposit facility auction in ’17 oversubscribed

Banks swarmed the Bangko Sentral ng Pilipinas’ 2017’s first term deposit facility (TDF) auction Wednesday following several undersubscribed auctions last December.

For the P30 billion in seven-day term deposits offered by the BSP, P43.991 billion were tendered.

The BSP fully awarded all the one-week facility at a yield of 3-3.1 percent.

For the P150 billion in 28-day TDF, bids reached P217.523 billion.

The yield for the one-month term deposit was within the 3-3.495 percent range.

On Jan. 11 and 18, the BSP will offer a total of P180 billion in its TDF auctions—P30 billion in seven-day and P150 billion in 28-day facility.

At the last auction for 2016, tenders for one-month term deposits offered by the Bangko Sentral ng Pilipinas were undersubscribed.

BSP officials said they expected the undersubscription during the holiday season, as banks would hold on to their cash to serve high seasonal demand.

According to BSP Governor Amando M. Tetancgo Jr., the bids they rejected last Dec. 28 “were outside the interest rate corridor.”

“As to the offered amount, the BSP continues to monitor the level of liquidity in the system and has the flexibility to change the volume it will offer for the TDF depending on the needs of the financial system,” Tetangco said.

Operational adjustments had been implemented by the BSP ahead of the implementation since June last year 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 or the former special deposit accounts (SDA) rate of 2.5 percent, which serves as the lower bound of the corridor.

“This is the first oversubscription for the 28-day tenor since Dec. 7 and lower maximum rate of 3.5 percent. This may be due to market normalization after the holidays and the FOMC meeting,” Tetangco  said in a text message to reporters, referring to the Federal Open Market Committee.