For the first time since the auction started this year, the Bangko Sentral ng Pilipinas (BSP) reported an undersubscription at its weekly auction of term deposits on Thursday, as banks held on to what liquidity they have, in anticipation of the considerable cash requirement of depositors during the monthlong Christmas holidays.
No one wants the vaults empty of cash. The various banks have been known to move in excess of P4 billion in a single day, as the Yuletide spending spree gathers in earnest.
At the auction, the shorter-termed offering was undersubscribed, as only around half, or P15.865 billion, of the P30 billion on offer was awarded.
For the 27-day tenor, the amount tendered and awarded totaled P113.214 billion, well short of the P150 billion on offer.
“There was under subscription at auction today. Possible reasons include seasonality [banks holding on to cash for the holidays] and the withdrawal of trust accounts from BSP facilities. These may have brought down the bid to cover ratio to 0.5288 and 0.7548 for the six-day and 27-day tenor, respectively,” BSP Governor Amando M. Tetangco Jr. told reporters.
The bid cover ratio compares the volume of bids or tenders to the amount offered for the certain instrument. A lower bid coverage ratio often points to a decline in the volume of tenders in relation to the offered volume
The banks’ tenders actually started falling last week, although bid volumes still outstripped offers.
“We see the level of liquidity in the system as still healthy and noninflationary. We, nevertheless, remain watchful of external developments that may affect domestic liquidity through shifts in capital flow direction and magnitude,” Tetangco said.
This relates to when more money chases after too few goods resulting to escalating inflation.
Nevertheless, yields continued to rise on Thursday, with the six-day term deposit yielding 2.6059 percent, while the 27-day neared the 3-percent mark to hit 2.9557 percent.
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