Term deposit auction still oversubscribed

MANILA, Philippines – Local investors swamped the central bank’s term deposit facility auction anew yesterday, unaffected by ongoing concerns over the UK’s historic exit from the European Union (EU).

On its fourth week of offer, a total of P153.34 billion in tenders were made to seven- and 28-day term facilities of the Bangko Sentral ng Pilipinas (BSP).

Broken down, P61.38 billion in tenders were made for one-week papers, while a higher P91.96 billion was filed for 28-day instruments.

The BSP awarded P10 billion and P20 billion for seven and 28-day periods, respectively, at a rate of 2.5 percent.

“Liquidity is just too big in relation to what the BSP is offering that external factors were probably not enough to affect the market’s desire to deploy funds,” said Emilio Neri Jr., lead economist at Bank of the Philippine Islands.

Last June 23, the UK voted to leave the 28-nation EU, sending global financial market jitters that was said to have wiped out $2.1 trillion in equity values.

The Philippines, Neri said, is “not really much affected” by the volatility similar to other Asian markets, noting the stock market prices were already up yesterday following three days of decline.

The central bank opened its term deposit facility last June 8 as an avenue for investors to park their funds and gain interest, while authorities use it to control excessive liquidity that can push inflation.

Its weekly offers have so far been oversubscribed with combined tenders at P199.71 billion on June 8, P156.78 billion on June 16 and P164.95 billion on June 22.

Neri said similar to the bond market, investors see the BSP as safe haven during uncertainties.

Neri, however, said tenders may soon taper off in the coming weeks even after monetary authorities decided to increase its award volume for 28-day papers to P40 billion by the next quarter.

“Remember that when this facility was launched, others like the special deposit accounts were closed. So in effect, what you are seeing now are just those funds migrating to another avenue,” Neri explained.

“It’s from one pocket of the BSP to another. As (investors) get used to the new facility, we will see offers go down,” he said.

The facility was opened in line with the shift to interest rate corridor that saw the main policy rate in between the deposit facility and overnight lending rates.