BSP moves to neutralize cash from bank reserve cut
The Bangko Sentral ng Pilipinas has raised the amount of cash it siphons off from the market weekly to its highest level since November 2017 in an effort to “sterilize” liquidity freed up by last week’s bank reserve requirement cut.
On Wednesday, the BSP made a full award of P110 billion for all the three tenors of its term deposit facility, which it uses to encourage financial institutions to deposit idle cash with the central bank in exchange for a fixed yield.
The 7-, 14- and 28-day instruments were all oversubscribed though not by as much as previous weeks, possibly indicating that the demand and supply for short-term liquidity management tools between banks and regulators were close to reaching an equilibrium.
BSP Governor Nestor Espenilla Jr. said last week that the enhancements being done on the term deposit facility, including the introduction of the two-week tenor to bridge the gap between the 7- and 28-day instrument, was meant to ultimately help keep the country’s inflation rate in check.
He emphasized that the increased volume of the term deposit facility tenders would neutralize the P90 billion in cash that would be released into the financial system by last week’s Monetary Board decision to cut banks’ reserve requirements by one percentage point to 19 percent.
On Wednesday, banks submitted P53.3 billion in bids for the P50 billion on offer for the 7-day facility. All bids were accepted, and the average yield rose marginally to 2.8164 percent from the previous week’s 2.7232 percent.
For the 14-day facility, banks submitted P46.7 billion in bids for the P40 billion on offer, with the average yield rising to 2.9798 percent from last week’s 2.8737 percent.
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.