BSP cuts volume of term deposit offering

The Bangko Sentral ng Pilipinas (BSP) yesterday scaled back the volume of its antiinflation liquidity mopping up operations after the banks’ tepid response last week, while simultaneously allowing financial institutions to bid up rates across the board.

At the weekly term deposit facility auction, banks submitted P121 billion worth of tenders for the P110 billion being offered by the BSP. The offered volume was P10 billion lower than the previous week’s P120 billion window for which banks submitted only P98.3 billion worth of bids.

This week, the response from banks was stronger, thanks to greater liquidity in the financial system ahead of the implementation of the 1-percentage point reduction in their statutory reserve requirement next month.

The 7-day facility drew P48.2 billion worth of tenders from banks, while the BSP was willing to accept as much as P50 billion. Authorities ended up accepting P48.1 billion worth of bank deposits, with the yield rising to 3.6930 percent from the previous week’s 3.5866 percent.

For the 14-day instrument, the banks tendered P46.9 billion in bids for the P40 billion on offer. Regulators made a full award with the yield rising to 3.6683 percent from last week’s 3.5783 percent.

The yield on the 28-day instrument rose to 3.6431 percent from the previous week’s 3.5716 percent. Banks tendered P25.9 billion worth of bids for the P20 billion on offer. The offer volume for the longest-dated securities were returned by the central bank to its original level after last week’s lukewarm response from banks.

The BSP conducts auctions weekly for short term securities, soliciting tenders from financial institutions seeking to deposit their excess cash in exchange for interest fees.

The rise in interest rates across the entire spectrum of the term deposit facility came after BSP Governor Nestor Espenilla Jr.’s earlier pronouncement that authorities would allow banks to push yields higher if deemed necessary by “market demand.”