No additional term deposit offer amid big demand

Appetite for the Bangko Sentral ng Pilipinas’ (BSP) term deposits was still strong as traders purchased all P30 billion offered Wednesday, but the regulator said it would be keeping its programmed offering for the next two weeks.

The BSP’s fourth term deposit facility (TDF) auction Wednesday was again oversubscribed.

Banks tendered P61.4 billion for the P10 billion worth of seven-day term deposits. Tenders for the P20 billion worth of 28-day term deposits auctioned off hit almost P92 billion.

The yield remained at 2.5 percent for both the seven- and 28-day tenors.

The BSP also announced it would offer P10 billion in seven-day term deposits and P40 billion in 28-day term deposits on July 13, similar to its programmed offer for July 6. The first four auctions each offered a lower P30 billion in term deposits.

Last week, Deputy Governor Diwa C. Guinigundo said the BSP would keep the once-a-week TDF auction schedule in the near term while awaiting the market to fully adjust to the implementation of the interest rate corridor (IRC) system.

The BSP has been holding weekly TDF auctions under the IRC since June. The IRC was aimed at mopping up excess liquidity and tempering volatility in market rates by moving them toward the policy rate of 3 percent.

Guinigundo told reporters the BSP has yet to get its desired outcome “probably because we are just in the beginning stage.”

He said, however, the regulator was not in a hurry. “That is something that we expect because we want the market to get the feel of what it is to do active money market operations.”

Guinigundo said the BSP would adjust accordingly, depending on the market situation.

“Right now, we don’t see the need to increase or adjust the volume of offering or increase the frequency from once a week to twice a week. I think we are in a stable situation that does not require any dramatic adjustment,” he said.

The BSP earlier made operational adjustments ahead of the implementation of the IRC.

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.