By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) has raised its term deposit facility (TDF) auction by P50 billion to P180 billion for December.
The BSP increased the TDF volume for the 28-day from P120 billion to P150 billion and the 7-day tenor from P10 billion to P30 billion.
BSP Governor Amando M. Tetangco Jr. yesterday said they adjusted the TDF volume higher – for the seventh time since June – after observing higher activity in its overnight deposit facility (ODF).
“We raised the auction size for both facilities for the December auctions as there is still a significant amount of liquidity flowing into our ODF,” said Tetangco.
“Capturing more liquidity in the longer tenors would help us better manage liquidity in the system,” he added. The BSP does not allow the use of non-resident funds for placements in its TDF and the ODF.
Both the TDF and ODF are monetary instruments which were implemented last June 3 and with it, the BSP adjusted the price it charges for its overnight rates.
Tetangco said that the auction “continue to be effective in mopping up excess liquidity in the system.”
“We noted a decline in the tender amount in the 28-day from about P232 billion last week to about P207 billion this week. This may be due to market positioning ahead of seasonal requirements given maturity of the 28-day is mid-December already,” he commented.
Tetangco said the “uptick in the auction average rates” are still consistent with price movements of past TDF auctions.
During yesterday’s auction, the 28-day had a tendered amount of P207.302 billion against offer of P120 billion and the 7-days had P29.598 billion tendered against P10 billion awarded.
The 28-day term deposit and the 7-day tenor had bid coverage ratios of 2.9598 and 1.7275, respectively.
The weighted average accepted yield for the longer-dated term deposit, in the meantime, was at 2.7842 percent and for the shorter term, 2.5232 percent.
The BSP implemented the interest rate corridor or IRC system last June 3.
The IRC is a system for guiding short-term market rates towards the BSP policy interest rate which is the overnight reverse repurchase rate, and to help improve monetary policy transmission and to limit interest rate volatility.