Bangko Sentral ng Pilipinas cuts term deposit volume

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has reduced the volume of term deposits to be auctioned next Wednesday to P40 billion from P50 billion due to the ongoing offering of retail treasury bonds (RTBs) by the national government.

BSP Deputy Governor Diwa Guinigundo said the reduction of the size of the term deposit auction facility (TDF) was due to the expected settlement of RTBs next week.

The government is raising as much as P200 billion from the offering of five-year RTBs with a coupon of 6.25 percent until today. So far, the Bureau of the Treasury (BTr) has raised P173 billion as of Friday.

The auction committee has decided to temporarily drop the 28-day tenor and only offer seven- and 14-day term deposits on Wednesday.

Banks swarmed the liquidity absorption facility last Wednesday with bids reaching P95.03 billion, almost double the issue size of P50 billion.

Bids for the P20-billion seven-day term deposits reached P42.28 billion, while the tenders for the 14-day tenor amounted to P33.52 billion versus the P20 billion offering.

Likewise, the 28-day tenor was oversubscribed as tenders amounted to P19.23 billion versus the offer size of P10 billion.

“While BTr absorbed enormous liquidity through its RTB, part of such liquidity deposited with the BSP is withdrawn and continuously funds debt servicing, payment to suppliers and normal government operations,” Guinigundo said.

Term deposit rates eased across all tenors as easing inflation gives monetary authorities some space and flexibility to make adjustments after raising benchmark rates by 175 basis points.

The seven-day tenor fetched a lower yield of 5.0342 percent the other day from last week’s 5.1027 percent, while the yield of the 14-day term deposits eased 2.09 basis points to 5.1452 percent from 5.1661 percent.

Likewise, the yield of the 28-day tenor declined 2.59 basis points to 5.1758 percent from 5.2017 percent.

Inflation continued to ease, hitting an 11-month low of 3.8 percent in February from 4.4 percent in January due to lower food prices. The consumer price index declined steadily after peaking at 6.7 percent in September and October.

Inflation accelerated to 5.2 percent last year from 2.9 percent in 2017 and exceeded the BSP’s two to four percent target due to elevated oil and food prices as well as the weak peso.