Banks shifting to safer liquid assets

MANILA, Philippines — Banks continued to shift to safe and high liquid assets as well as park their excess funds in the liquidity absorption facility of the Bangko Sentral ng Pilipinas (BSP) amid the coronavirus disease 2019 or COVID-19 pandemic.

At yesterday’s auction of the term deposit facility (TDF),  the yield of the seven-day tenor slipped further, easing by 0.76 basis points to 2.2578 percent from last week’s 2.2654 percent.

“The auction results are consistent with current ample liquidity in the financial system and market preference for safe, highly liquid assets,” BSP Deputy Governor Francisco Dakila Jr said.

He said bids amounted to P231.35  billion, more than double the increased volume of P100 billion.

The central bank has yet to resume the auction of the 14 and 28-day term deposits to encourage banks to lend excess funds to individuals and companies particularly micro, small, and medium-scale enterprises (MSMEs) affected by the health crisis. It resumed the auction but limited to the seven-day tenor on April 15.

The central bank suspended the weekly TDF starting March 18 to address the liquidity needs of banks after Malacañang imposed a Luzon-wide enhanced community quarantine.

“Looking ahead, the BSP will continue to assess prevailing financial system liquidity in determining the appropriate size and tenors in its TDF auction,” Dakila said.

The yield of the seven-day tenor continued to reflect the impact of the recent BSP measures to boost market liquidity as well as indicative of a broader increase in market appetite for BSP financial instruments and government securities.