BIDS continued to rise in the Bangko Sentral ng Pilipinas’s (BSP) auction facility on Wednesday, as banks fight over the shrinking volume offered by the Central Bank for term deposits during the week.
Data from the Central Bank showed that all three tenors in their TDF were oversubscribed by double the volume offered for each maturity during the week.
The amount tendered for the 7-day tenor, in particular, reached P25.4 billion on Wednesday’s auction, rising from the P14.4 billion in the previous week and exceeding the P10 billion offered for the week.
The same is seen in the BSP’s 14-day term deposits, with the total volume of bids amounting to P22.1 billion on Wednesda—significantly higher than the P17 billion bids in the previous week and the P10 billion offered by the BSP.
Bids for the 28-day term deposits also surged on Wednesday after two weeks of not being included in the weekly auction. Total tenders on Wednesday amounted to P20 billion for 28-day term deposits, indicating oversubscription from the P10 billion offered during the week.
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.
The movement of the rate, meanwhile, continued to drop during the week to move parallel to the lower overnight reverse repurchase rate of the BSP following a 25-basis-point cut earlier this year.
For the 7-day term deposit, rates fell from 4.624 percent last week to 4.5537 percent this week. For 14-day term deposits, meanwhile, the rate fell from 4.7002 percent last week to 4.6129 percent this week.
For 28-day term deposits, the rate hit 4.6347 percent on Wednesday.