Lesser compulsion for bank TDF purchases this week

Fewer excess peso liquidity in the system allowed the Bangko Sentral ng Pilipinas (BSP) on Wednesday similarly to offer fewer liquidity-sapping term deposits.

Latest results from the BSP’s term-deposit facility (TDF) auction show continued undersubscription in the longer-dated TDFs, even though the volume of offering has since been lowered.

In particular, banks and trust entities were keen on winning only some P32.84 billion at Wednesday’s 28-day TDF bidding exercise, significantly lower than the anticipated minimum offer of P40 billion this week.

BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo said the lower-than-expected TDF subscription effectively meant that bank funds have been deployed for lending or for foreign-exchange purchases or otherwise invested in government securities, including retail Treasury bonds or RTBs.

“But in the final analysis, all this means there is lower excess liquidity, which the BSP should mop up,” Guinigundo said, adding quickly that lower bids do not mean scant liquidity levels in the financial system.

He further explained the correct response was for the BSP to soak on just enough liquidity to help keep prices stable, which was also why the volume of special deposit offerings have been progressively reduced. The BSP only recently cut the TDF offering menu, particularly in the case of the 28-day TDF from P90 billion to only P40 billion starting next month.

For the seven-day TDF, banks won P41.27 billion in bids on Wednesday, or just a tad more subscriptions than the P40-billion offering for the short-dated TDF.

Rates were in the same direction this week, as both the seven-day and 28-day TDF fetched higher yields at the auction.

In particular, the seven-day TDF rate averaged 3.4171 percent, higher than the 3.4005 percent in the previous week. The rate for the 28-day TDF averaged 3.494 percent, up from last week’s 3.492 percent.

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Bianca Cuaresma graduated cum laude from the University of Santo Tomas (UST) with a degree in AB Journalism. She was with the BusinessMirror during her internship in 2012 where she was assigned at the Department of Foreign Affairs (DFA) beat. She continued to be of service to the paper after she graduated in 2013. In 2014, she was awarded as the Reporter of the Year by the paper for her coverage in the Bangko Sentral ng Pilipinas (BSP). She is a BusinessMirror reporter for 3 years now, and has covered general assignments and agencies related to banking and finance in the country.