Banks continue to subscribe to the Bangko Sentral ng Pilipinas’s (BSP) liquidity-siphoning facility, despite earlier observations of seemingly tighter cash-supply conditions as evidenced by the slower growth in domestic liquidity.
Data from the Central Bank showed that banks continue to bid in more than what the Central Bank is offering in terms of term deposits on Wednesday, as all tenors are oversubscribed for the week.
In particular, bids in the BSP’s seven-day tenor hit P27.254 billion during the week, overshooting the P20-billion offer on Wednesday. This is also true with the 14-day tenor, with bids hitting P22.198 billion, about P2 billion in excess of the P20-billion auction volume during the week.
For the 28-day tenor, which was not offered last week, the demand also surged to P16.078 billion, oversubscribing from the P10-billion offering for the week.
The term deposit facility 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.
Rates during the week showed mixed movement as those in the short- and long-term tenors fell while the rate in the medium tenors rose during the week.
The seven-day rate hit 4.9803 percent on Wednesday, down from 5.0214 percent in the previous week. The rate in the 28-day facility, meanwhile, hit 5.0987 percent down from the 5.2017 percent last week.
The rate in the 14-day facility, however, hit 5.1079 percent, rising from the 5.0975 percent in the previous week.
Since the start of the year, banks have been showing sustained interest in the BSP’s TDF, with bouts of oversubscription every week. For 2019, the BSP has only increased its volume of offering once—in the first week of January—from P30 billion to the current P50 billion offered.
Earlier this month, BSP Deputy Governor Diwa Guinigundo said that the oversubscription in the weekly TDF is an indicator that there continues to be “ample liquidity” in the local stream.