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Friday, March 29, 2024

BSP increases auction of term deposits

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Bangko Sentral ng Pilipinas increased the size of term deposits offered in the weekly auction from P50 billion to P70 billion starting Aug. 3 to effectively siphon off excess liquidity, Governor Amando Tetangco Jr. said Wednesday.

The week-long tenor will continue to account for P10 billion but the 28-day tenor will be increased to P60 billion from the previous P40 billion, Bangko Sentral said.

The seventh term deposit auction on Wednesday remained highly oversubscribed. Data showed the P10 billion offered for a week tenor received total bids of P48.4 billion, while the month-long P40-billion term deposits attracted total bids of P129.4 billion. 

Both tenors fetched a weighted average accepted yield of 2.5 percent, matching the floor rate in the deposit facility.

“The auction results continue to show that there is good liquidity in the system, with both tenors being filled at 2.5 percent with substantial over subscription. There also continues to be good interest in the longer tenor,” Tetangco said in a text message. 

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“We have thus increased the 28-day volume to P60 billion as part of our plan to gradually raise the auction size. We will continue to adjust the auction size, as market conditions warrant,” he said.

Tetangco said last week the continuous high oversubscription in term deposit auctions warranted an assessment if the volume would be increased from the current P50 billion weekly.

The first six weekly auctions starting June 8 were all highly oversubscribed. Tetangco said the regulator was closely monitoring the trend to better gauge if there was a need to increase the volume and even the frequency of auctions.

Tetangco said this was also a proof that monetary conditions were supportive of economic growth.  Tetangco also said Bangko Sentral might consider lowering the reserve requirement of banks.

The term deposit facility is Bangko Sentral’s latest tool to siphon off excess liquidity in the financial system.

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