BANGKO Sentral ng Pilipinas is not ruling out the possibility of increasing the volume and frequency of its term deposit facility auctions if the need arises in the future, a high-ranking official said over the weekend.
“We will move whenever it is necessary in terms of volume and frequency. But right now we don’t see the need to increase or adjust the volume of offering or increase the frequency from once a week to twice a week,” Deputy Governor Diwa Guinigundo said in an interview.
“I think we are in a stable situation that does not require any dramatic adjustment in the volume as well as the frequency of the TDF,” he said.
Guinigundo said Bangko Sentral was not yet getting the desired outcome of the current auctions during the initial stages.
“Well not at this point probably because we are just in the beginning stage. And that is something that we expect because we want the market to get the feel of what it is to do active money market operations… We are not in a hurry,” Guinigundo said.
He said Bangko Sentral was conducting the auctions gradually so as not to shock the market.
He said the market itself was doing the adjustment.
Starting July 6, Bangko Sentral will increase to P50 billion from P30 billion the volume of deposits to be offered every week to banks and trust companies in the term deposit facility auction to be more effective in siphoning off excess liquidity in the financial system.
In an earlier notice posted on its Web site, Bangko Sentral said of the P50 billion weekly volume, seven-day tenor deposits would still account for P10 billion. But there will be a significant increase in the 28-day tenor deposits to P40 billion from the previous P20 billion.
Bangko Sentral has been offering to banks and trust entities P10 billion worth of term deposit for the seven-day tenor and P20 billion for the 28-day tenor, or a total of P30 billion weekly, since June 8 this year.
Bangko Sentral Governor Amando Tetangco Jr. said the move was part of the refinement of the auction as the market was becoming more familiar with the system.
“The auction sizes are announced [as we had earlier said] two weeks in advance. So today’s announcement is consistent with that. This is also part of the discipline of the process. We will make further changes to the volume as necessary to help make the TDF more reflective of market conditions,” Tetangco said in a text message.
Guinigundo said the increase was consistent with the regulator’s earlier pronouncement that the volume would be scaled up gradually to ensure smooth transition to the interest rate corridor regime.
“We continue to see ample liquidity in the system that indeed warrants an increase in the TDF volume to ensure monetary stability and sustained economic growth,” Guinigundo said in a text message.
ING Bank Manila senior economist Joey Cuyegkeng said in an earlier report Bangko Sentral might start increasing the TDF volume starting next month.
He said the weekly auctions had been oversubscribed by more than five times the offered amount of P30 billion a week, or an “indication of system’s liquidity.”
The first TDF auction on June 8 attracted much interest from banks and trust entities. The P10 billion offered under the 7-day tenor generated total bids of P82.438 billion, while the P20 billion auctioned under the 28-day tenor drew total tenders of P117.271 billion. Both tenors fetched a 2.5-percent weighted average yield.