Market wrangles for term deposits as offer hiked to P180B

Six months after it started mopping up excess liquidity in the system, the Bangko Sentral ng Pilipinas (BSP) will further increase the total volume of term deposits it will issue next month to P180 billion, or six times the original volume.

In an advisory Wednesday, the BSP said it will offer to banks and trust institutions a total of P180 billion in term deposits on Dec. 1—P30 billion for the six-day facility and P150 billion for the 27-day.

The weekly term deposit facility (TDF) auctions are held on Wednesdays, but due to the holiday on Nov. 30, the auction for that week will instead be held on Dec. 1.

The TDF auction on Dec. 1 will be the first with a higher volume for the shorter tenor, which had stayed at P10 billion since the auctions began in June.

The longer tenor, meanwhile, was increased from P120 million this month.

For the month of November, the BSP’s term deposit offering totaled P130 billion.

Wednesday’s auction was again oversubscribed, with tenders totaling P236.9 billion.

For the seven-day facility, bids reached P29.6 billion; for the 28-day term deposits, P207.3 billion.

The accepted yields remained at 2.5-2.525 percent for the seven-day and 2.5-2.8 percent for the 28-day.

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.

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.

In a text message to reporters, BSP Governor Amando M. Tetangco said this week’s auction showed that “the BSP facilities continue to be effective in mopping up excess liquidity in the system.”

He noted a drop in tenders for the 28-day facility from P232 billion last week, but “this may be due to market positioning ahead of seasonal requirements given the maturity of the 28-day is in mid-December already.”

Tetangco added “the uptick in the auction average rates continued to be in line with price movements in the recent past auctions.”

As for the higher volumes next month, he said: “We raised the auction size for both facilities for the December auctions as there is still a significant amount of liquidity flowing into our overnight deposit facility. Capturing more liquidity in the longer tenors would help us better manage liquidity in the system.”