BSP Governor Amando Tetangco Jr. said the central bank decided to increase the size of the TDF amid the strong inflow of liquidity into the overnight deposit facility (ODF). File photo
MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) is raising anew the volume of term deposit facility (TDF) starting next month to siphon off excess liquidity in the financial system.
Starting Dec. 1, the size of the TDF will be at P180 billion from the current level of P130 billion. This is the sixth time the central bank is raising the size of the weekly auction of seven- and 28- day term deposits since the facility was launched last June 8 with an original of P30 billion.
The size was raised to P50 billion on July 7, P70 billion on Aug. 3, P90 billion on Aug. 31, P110 billion on Oct. 5, P130 billion on Nov. 2, and P180 billion starting next month.
The P50 billion increase next month is the biggest since the monthly adjustment of P20 billion per month. The TDF was launched as part of the shift to the interest rate corridor (IRC) system last June 3.
BSP Governor Amando Tetangco Jr. said the central bank decided to increase the size of the TDF amid the strong inflow of liquidity into the 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. Capturing more liquidity in the longer tenors would help us better manage liquidity in the system,” Tetangco said.
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The gradual increase in the volume of the TDF is in line with the objective of the IRC to bring market rates closer to the policy rates
Tetangco said results of the auction of term deposits show both the TDF and ODF are effective in mopping up excess liquidity in the financial system.
“The auction shows that the BSP facilities continue to be effective in mopping up excess liquidity in the system,” he said.
During yesterday’s auction, the seven-day term deposits yesterday fetched 2.5232 percent from last week’s 2.5189 percent as accepted yield ranged between 2.5 and 2.525 percent while the yield of the 28-day term deposits inched up to 2.7842 percent from 2.6920 percent as accepted yield ranged from 2.5 to 2.8 percent.
“The uptick in the auction average rates continued to be in line with price movements in the recent past auctions,” Tetangco said.
Bids for the seven-day term deposits yesterday reached P29.59 billion for a bid coverage ratio of 2.9598, while tenders for the 28-day term deposits amounted to P207.3 billion for a bid coverage ratio of 1.7275.
The BSP made a full award of P10 billion for the seven-day term deposits and P120 billion for the 28-day term deposits yesterday.
