THE Bangko Sentral ng Pilipinas’s (BSP) term deposit auction remained oversubscribed across all tenors on Wednesday, as banks look for avenues to park excess liquidity.
Data from the Central Bank showed that bids for the seven-day term deposits were oversubscribed by about 9 billion as the total tenders hit P39.185 billion during the week. The volume offered was P30 billion. Tenders for seven-day term deposits increased from the P38.63 billion in the previous week.
While overall bids were lower for 14-day term deposits, the medium term offering remained oversubscribed during the week with total tenders hitting P35.52 billion. The volume offered was P30 billion for the week. This was, however, a decline from the P43.38 billion bids in the previous week.
For 28-day term deposits, the total tenders hit P39.805 on Wednesday, rising from the P32.767 billion seen in the previous week. The total volume offered was P30 billion—up by P10 billion from last week’s offer.
BSP Sector-In-Charge Iluminada Sicat said the results of Wednesday’s auction reflected in part the banks’ preference to place their funds in the BSP’s deposit facilities ahead of the implementation of the reduction in reserve requirements on November 1, 2019 (as announced on September 27, 2019).
Sicat said the increase in available liquidity in the financial system owing to higher disbursements by the national government also influenced the oversubscription for 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, showed an across-the-board decline during the week. For seven-day term deposits, rates decreased from 4.2348 percent last week to 4.2264 percent this week. For 14-day term deposits, meanwhile, the rate went down from 4.2485 percent last week to 4.2348 percent this week.
For 28-day term deposits, meanwhile, the rate declined to 4.2227 percent on Wednesday, from the 4.2754 percent last week.