INVESTORS in the Bangko Sentral ng Pilipinas’s (BSP) term deposit facility (TDF) proved to be liquid as tenders for the facility during the auction on Wednesday amounted to P31.407 billion.
The Central Bank awarded the full P10 billion on offer for the seven-day TDF with tenders amounting to P14.410 billion, while the 14-day tenor bucket was also awarded the full P10 billion on offer as bids amounted to P16.997 billion.
The 28-day tenor was not offered during the TDF auction on Wednesday.
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.
In terms of the rates, the seven-day TDF posted a rate of 4.6240 percent, lower than the 4.6278 percent reported during the TDF auction on June 19, 2019.
The 14-day TDF saw rates decline to 4.7002 percent coming from the previous rate of 4.7107 percent in last week’s TDF auction.
The 28-day tenor was also not offered during the June 19 TDF auction.
In May, the BSP’s Monetary Board moved to cut its deposit requirement on smaller banks in the system, after earlier cutting the rates for the universal and commercial banks reserve requirement ratio (RRR).
Monetary authorities decided to cut the RRR of thrift banks by 2 percentage points from 8 percent to 6 percent.
Image credits: Ed Davad