BSP raises volume of term deposits

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) raised the volume of the term deposit auction facility (TDF) to P80 billion for this coming Wednesday from P60 billion as appetite for the debt instrument picked up after a series of rate hikes.

The auction committee raised the offering of seven-day term deposits to P50 billion on Oct. 10 from P40 billion last Wednesday, while the issue size for the 14-day tenor was doubled to P20 billion from P10 billion.

The offer size of the TDF has been reduced steadily from a record high of P120 billion on May 23 to P110 billion last May 30, P100 billion last June 6, P70 billion last Sept. 19, and finally to P60 billion last Sept. 26.

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 toward the BSP policy interest rate. It also serves as a liquidity absorption facility of the central bank.

The issue size of the weekly auction depends on the liquidity forecast of the BSP.

The facility was oversubscribed anew as tenders amounted to P131.02 billion or more than double the issue size of P60 billion. Bids for the P40 billion seven-day term deposits reached P77.3 billion, while tenders for the P10-billion 14-day tenor amounted to P27.22 billion.

Likewise, bids for the 28-day tenor reached P26.5 billion or 2.5 times the P10 billion volume.

Term deposits fetched record yields last Wednesday with the seven-day term deposits commanding a record yield of 4.7127 percent, 29.12 basis points higher than last week’s 4.4215 percent.

The 14-day tenor commanded a 26.3-basis point increase to an all-time high of 4.7352 percent from 4.4722 percent, while the rate of the 28-day term deposits rose 30.07 basis points to a record high of 4.7884 percent from 4.4877 percent.

BSP officer-in-charge Diwa Guinigundo said banks again recalibrated their bids after the central bank’s Monetary Board raised interest rates anew by another 50 basis points as part of a stronger policy action to curb rising inflationary expectations.

“BSP’s policy rate hike signals higher yields in the TDF. This is part of the recalibration of liquidity and the adjustment process towards greater macro stability,” Guinigundo said.

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