THE term deposit auction of Bangko Sentral ng Pilipinas on Wednesday remained highly oversubscribed as banks and trust entities swarmed the P70-billion weekly volume offered to the public.
Data showed that the P10-billion offered with a seven-day tenor attracted total tenders of P48.035 billion, while the month-long P60 billion put on the auction block received total bids of P151.879 billion.
Both tenors fetched a weighted average accepted yield of 2.5 percent, matching the floor rate in the overnight deposit facility, formerly the special deposit account facility.
Bangko Sentral Deputy Governor Diwa Guinigundo, however, said the oversubscription was declining as shown by the lower bid-to-coverage ratio of 2.53 percent on Wednesday from 5.86 percent when the auction officially started on June 8.
“We are seeing the initial signs that the open market operations of the BSP under the IRC are beginning to bite. First, the bid to coverage ratio has gone down from 5.86 on June 8 to last week’s 2.87 to today’s 2.53. This means oversubscription is declining and more funds are being mopped up by the BSP increasingly through the term deposit facility,” Guinigundo said in a text message.
“And second, interest rates are now beginning to inch up given the liquidity dynamics among the banks both in the interbank and with the BSP. We should see as a result of the IRC implementation market rates slowly moving towards the policy rate, signaling a more effective monetary policy,” Guinigundo said.
The oversubscription prompted Bangko Sentral to increase for the third time the weekly volume to P90 billion from the present P70 billion beginning Aug. 31 in a bid to more effectively siphon off excess liquidity in the financial system.
The seven-day tenor will continue to account for P10 billion but the 28-day tenor will be increased to P80 billion from P60 billion.
The auction started off with an initial weekly volume of P30 billion on June 8. It was increased to P50 billion on July 7 and to P70 billion on Aug. 3.
Guinigundo said earlier the regulator might consider reducing the reserve requirements of banks if the parked funds at the overnight deposit facility declines to P500 billion as a result of the weekly TDF auctions.
Guinigundo said the parked funds at the SDA was currently around P1 trillion and the weekly term deposit facility auctions would reduce that amount in the coming months.