Bangko Sentral ng Pilipinas sold P110 billion worth of term deposits during its regular auction Wednesday, as demand for the facility continues to be strong amid excess liquidity in the financial system.
Bangko Sentral said the term deposit auction was highly oversubscribed, as the seven-day P10-billion deposits received total tenders of P35 billion, with a weighted average accepted yield of 2.5 percent, matching the floor rate in the overnight deposit facility.
The month-long P100-billion worth of deposits attracted total bids of P196.9 billion, with a higher weighted average accepted yield of 2.55 percent.
“We continue to see the expected result from the TDF as an active open market instrument. We mop up excess liquidity resulting in the decrease in the bid to coverage ratio,” Bangko Sentral Deputy Governor Diwa Guinigundo said in a text message.
He said as overnight funds migrated into the seven-day and 28-day placements, the beginning of a modestly upward path of interest rates for longer maturities could be seen.
“BSP policy rate continues to provide the guidance to market rates and considering that inflation rate is moving closer to the target and talks about the impending US Fed normalization remain live, the trajectory even for interbank rates is indeed moving towards the policy rate,” Guinigundo said, adding the current monetary policy remained appropriate.
Bangko Sentral Governor Amando Tetangco Jr. earlier said the regulator would need more data points on the TDF auctions before it could make any adjustments in the reserve requirements of banks.
“While these are important, the TDF results are not the only factor to consider for a change in the RR. The outlook on inflation, any brewing pressures in other segments of the financial market are some of the other factors,” Tetangco said. “There is no black box for this… it is just a matter of timing.”
Bangko Sentral adopted the interest rate corridor system in June in a bid to improve the transmission of monetary policy through calibrated auctioning.
Continuous oversubscription by banks and trust entities prompted Bangko Sentral to increase for the fourth time on Oct. 5 by another P20 billion the weekly volume in the TDF auction, or from the previous P90 billion to P110 billion.
