BSP hikes term deposit auction to P70 B

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) has raised anew the volume of term deposits starting August as banks and trust entities continued to swarm the weekly auction under the term deposit facility (TDF).

BSP Governor Amando Tetangco Jr. said the central bank has decided to raise  the TDF to P70 billion starting Aug. 3 from the current issue size of P50 billion.

The higher volume now consists of P60 billion worth of 28-day term deposits from the current level of P40 billion while the size of seven-day term deposits was retained at P10 billion.

This is the third time the BSP has raised the volume since the interest rate corridor (IRC) system was introduced last June 3. The volume of the weekly auction was originally pegged at P30 billion last June but was raised to P40 billion this month.

Banks and trust entities swarmed yesterday’s auction  wherein P10 billion worth of seven-day term deposits and P40 billion worth of 28-day term deposits were offered.

Tenders for the seven-day term deposits reached P48.4 billion while bids for the 28-day term deposits amounted to P129.4 billion. Both tenors fetched 2.5 percent.

“The auction results continue to show there is good liquidity in the system, with both tenors being filled at 2.5 percent with substantial over subscription. There also continues to be good interest in the longer tenor,” Tetangco said.

This prompted the BSP to raise the volume of 28-day term deposits to P60 billion from the current size of P40 billion starting August.

“We have thus increased the 28-day volume to P60 billion as part of our plan to gradually raise the auction size,” he said.

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

“We will continue to adjust the auction size, as market conditions warrant,” 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.