BANGKO Sentral ng Pilipinas reduced the volume of the term deposit auction set on Nov. 2, 2017 to P130 billion from P140 billion due to sluggish demand for the month-long instruments.
Bangko Sentral Deputy Governor Diwa Guinigundo said Wednesday investors mostly remained biased in favor of the shorter-tenored deposits in the face of possible rate increases from the US Federal Reserve before the close of the year and the lingering geopolitical uncertainty.
“The economy is able to turn around and use their deposits as indicated by high loan to deposit ratio. We should therefore adjust the volume of offerings particularly to the 28-day TDF which has been undersubscribed for the last two weeks,” Guinigundo said in a statement to reporters.
“As we continue to monitor the market, we shall consider the unfolding market behavior and response to these key developments and adjust the volume of our open market operations accordingly,” Guinigundo said.
The volume of P40 billion for the week-long deposits will remain during the auction on Nov. 2. But the BSP reduced month-long deposits to P90 billion from P100 billion earlier.
On Wednesday, the P140 billion worth of term deposits offered by Bangko Sentral was undersubscribed by P23.45 billion due mainly to weaker demand for month-long instruments.
Data showed total tenders for the eight-day and 28-day deposits just reached P116.55 billion, P23.45 billion short of the total amount of P140 billion offered to market players.
The eight-day P40-billion worth of term deposits attracted bids of P40.868 billion with a weighted average accepted yield of 3.35 percent. The 28-day, P100-billion instruments lured tenders of just P75.687 billion and fetched a weighted average accepted yield of 3.49 percent.
The sluggish demand compelled Bangko Sentral to trimmed the volume of the 28-day instruments to P90 billion from P100 billion in its next auction on Nov. 2, 2017 to P130 billion.
Earlier, Bangko Sentral officials pointed to the successful issuance of retail treasury bonds by the Bureau of the Treasury in April as the main reason for investors’ less appetite for the month-long term deposits.
In April, the Bureau of the Treasury raised P175 billion from its three-year retail treasury bonds offering, including those generated from roadshows conducted nationwide. Banks were also setting aside funds for their reserve requirement compliance.
Bangko Sentral adopted the interest rate corridor system in June last year so that through calibrated auctioning, the transmission of monetary policy would improve.
On May 16, 2016, Bangko Sentral set the interest rates for the formal shift of its monetary operations to an interest rate corridor that started June 3. The rate on overnight lending facility of 6 percent was reduced to 3.5 percent, 3 percent in the overnight borrowing from 4 percent; while the special deposit account rate of 2.5 percent was kept steady.