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Banks swamp BSP’s long-term deposit offering

LOCAL banks flocked to the Bangko Sentral ng Pilipinas’s (BSP) long-term deposit offering on Wednesday, but showed little interest in its short- and medium-term counterparts. 

Data from the Central Bank on Wednesday showed oversubscription in the BSP’s 28-day term deposit facility (TDF) for this week’s auction, with bids rising to P12.423 billion during the week. This is higher than the total bids of P10.511 billion in the previous week and larger than the P10-billion volume offered by the BSP for the week. 

This is in contrast to the volume of tenders in the other two term deposit facilities, with the seven-day TDF registering the largest fall to P11.576 billion for the week. This is below the P20-billion offered for the week and a significant decline, from the P30.155-billion volume of bids in the previous week. 

For the 14-day facility, the volume of tenders hit P12.423 billion on Wednesday, falling from the P20.163 billion in the previous week. It is also below the P20-billion term deposit offer by the BSP on Wednesday. 

The TDF is one of the BSP’s liquidity absorption facilities to manage circulation in the economy.  As banks bid to park funds in the BSP’s facility, the TDF effectively siphons off a part of this structural liquidity from the financial system to bring market rates closer to the BSP’s main policy rate. 

All tenors fetched higher rates on Wednesday, with the 14-day TDF showing the most significant increase to 5.1770 percent, from the previous week’s 5.1437 percent. 

The rate for the seven-day TDF hit 5.0654 percent, up from the previous week’s 5.0447 percent, while for the 28-day facility it hit 5.1779 percent from the previous week’s 5.1547 percent.  

BSP Deputy Governor Diwa Guinigundo told reporters earlier that bouts of under subscription in certain tenors do not mean tightness in the country’s liquidity condition.  

Among the factors that banks consider before parking their funds with the BSP is cash demand from clients as well as other tap facilities being offered by the national government.

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