Volume of term deposits under review

MANILA, Philippines - Monetary authorities are carefully assessing the volume of term deposits as banks and trust entities continued to swarm the weekly auctions at the Bangko Sentral ng Pilipinas (BSP).

BSP Governor Amando Tetangco Jr. said the continued oversubscription of the seven- and 28-day term deposits would be considered in adjusting the volume of the term deposit facility (TDF) under the interest rate corridor (IRC) system.

Tenders for the seven-and 28-day term deposits Wednesday amounted to P195.81 billion or four times the issue size of P50 billion comprising of P10 billion for the seven-day term deposits and P40 billion for the 28-day term deposits.

Bids for the seven-day term deposits amounted to P55.04 billion while those for the 28-day term deposits reached P140.77 billion. Both tenors fetched 2.5 percent.

“This continues to indicate that there’s ample liquidity in the system and we are closely monitoring this. This will allow us to better gauge the liquidity requirements and we will consider that when we adjust the auction amount,” he said.

Term deposits are common tools used by central banks for liquidity management. It allows central banks to withdraw bulk of excess liquidity from the financial system.

Tetangco said the BSP could adjust the volume as it makes announcements two weeks prior to the scheduled auction and could also conduct another auction every Friday depending on the liquidity in the system.

“The idea really is to adjust the auction amount as we go along with the implementation of the interest rate corridor,” he added.

Starting this month, the BSP raised the volume to P50 billion comprising of P10 billion worth of seven-day and P40 billion worth of 28-day tem deposits from P30 billion consisting of P10 billion seven-day and P20 billion 28-day when the TDF was launched last June 3.

“We will have to make an assessment. But if the trend of oversubscription continues then we might decide to increase. But that is not final yet. We will have to make an assessment – whether there will be a room or a need or there’ll be a need to adjust the auctions,” Tetangco said.