MANILA, Philippines — Banks swarmed yesterday the term deposit auction facility (TDF) with the release of additional liquidity into the financial system after the Bangko Sentral ng Pilipinas (BSP) trimmed the reserve requirement ratio (RRR) last Friday.
The decision of the Monetary Board to reduce the level of deposits that banks are required to maintain with the central bank to 19 percent from 20 percent released about P90 billion in additional liquidity into the financial system.
BSP Governor Nestor Espenilla Jr. said there was strong participation in yesterday’s auction of term deposits resulting in oversubscription across all tenors.
“The TDF auction results confirm success and effectiveness of our operational adjustment,” he said.
Yesterday’s auction was oversubscribed as tenders reached P146.86 billion for the P110 billion offering. For one, bids for the seven-day term deposits reached P80.03 billion, higher than the P50 billion offer size.
Likewise, tenders for the 14-day term deposits amounted to P43.31 billion versus the P40 billion volume, while bids for the 28-day term deposit reached P23.52 billion compared to the offer size of P20 billion.
The yield of the seven-day term rose further to 3.1767 percent from last week’s 3.0685 percent, while the 14-day tenor fetched a higher rate of 3.1674 percent from 3.0984 percent.
Furthermore, the 28-day term deposits fetched a higher rate of 3.2627 percent from 3.1665 percent.
“(The) resulting yields trace a pattern consistent with healthy price discovery in line with macro fundamentals,” Espenilla said.
The TDF is a key liquidity absorption facility used by central banks for liquidity management. It is tasked to withdraw a large part of the structural liquidity from the financial system as part of the shift to the interest rate corridor (IRC) framework to bring market rates closer to the BSP policy rate.