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Banks cool to BSP’s 28-day TDF

BANKS showed less interest in the 28-day term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP), as bids declined during Wednesday’s auction following weeks of oversubscription.

Before the auction on Wednesday, bids for the BSP’s offering were oversubscribed as the excess liquidity from the reserve requirement ratio (RRR) cuts had stimulated the appetite of banks for the facility.

For 28-day term deposits, the total tenders hit P37.686 billion on Wednesday, falling into the undersubscription territory as the volume offered was P40 billion during the week. This week’s overall tenders was P2.119 billion lower than last week’s P35.52 billion.

However, bids for the seven-day term deposits were still oversubscribed by about P12.5 billion as the total tenders hit P32.563 billion during the week. The volume offered was P20 billion. This was, however, P6.622 billion lower compared to the P39.185 billion tenders in the previous week.

The same is true for the 14-day term deposits, as the medium-term offering remain oversubscribed during the week with total tenders hitting P30.34 billion. The volume offered was P30 billion for the week. The figure is lower than the P35.52 billion in bids recorded in the previous week.

Earlier, BSP Sector-In-Charge Illuminada Sicat attributed the banks’ preference for the BSP’s deposit facilities to the implementation of the reduction in reserve requirements on November 1.

Sicat said the increase in available liquidity in the financial system owing to higher disbursements by the national government is also influencing sustained bids.

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.

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