BSP further cuts volume of term deposit auction

Lawrence Agcaoili - The Philippine Star

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is set to auction P30 billion worth of term deposits today, lower than last week’s P50 billion due to lack of appetite from banks amid the long holidays.

The auction committee is bidding out P10 billion worth of seven-day term deposits at the term deposit auction facility  (TDF), lower than last week’s P30 billion.

On the other hand, the BSP retained the volume of the 14-day tenor at P10 billion and the 28-day term deposits at P10 billion.

BSP Deputy Governor Diwa Guinigundo said banks are expecting more cash usage during the holidays leading to Christmas and New Year.

“As such, they are willing to place their money with BSP to a limited extent across tenors,” Guinigundo said.

The central bank adjusts the size of the TDF based on liquidity forecasts.

Guinigundo said there is a higher demand for cash and less propensity to deposit with the BSP these days.

The P50-billion TDF last week was undersubscribed as tenders across the three tenors only reached P35.22 billion.

Tenders for the P30 billion six-day term deposit offering only reached P18.71 billion, but the auction committee accepted P15.71 billion. Likewise, bids for the P10 billion 23-day term deposit issuance only reached P8.7 billion but the BSP only awarded P6.7 billion.

The 27-day tenor was also undersubscribed as bids for the P10-billion issuance only reached P7.81 billion. The BSP auction only accepted P6.81 billion as accepted yields ranged between 5.15 percent and 5.25 percent.

The BSP adjusted the tenor of the term deposits as Malacañang declared Dec. 26 as a holiday.

The six-day tenor fetched a record 5.1903 percent last Thursday or 4.68 basis points higher than the previous week’s 5.1462 percent. Accepted yields ranged from 5.1 to 5.25 percent.

On the other hand, the yield of the 13-day term deposits slipped 1.74 basis points to 5.2014 percent from an all-time high of 5.2188 percent, while the 27-day term deposit rate was almost unchanged at 5.2094 percent from a record 5.2092 percent.

The TDF was launched in June 2016 as part of the shift to the interest rate corridor (IRC) framework to guide short-term market rates towards he BSP policy interest rate. It also serves as a liquidity absorption facility of the central bank.

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