MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) raised anew the volume of term deposits being auctioned every Wednesday amid strong demand from banks and trust entities.
BSP Governor Amando Tetangco Jr. said the volume of the term deposit facility (TDF) consisting of seven- and 28-day term deposits has been adjusted upwards to P110 billion starting Oct. 5 from the current size of P90 billion.
The size of the 28-day term deposits being auctioned every Wednesday would increase to P100 billion starting next month from the current P80 billion, while that of the seven-day term deposits was retained at P10 billion.
“The increase in the 28-day auction is part of the auction refinement program. The adjustment has been for the longer tenor so far because that is where we find greater market appetite for now,” he added.
The BSP chief said the central bank could also upsize the volume of the seven-day term deposits depending on market conditions.
“We can make similar upward adjustments to the shorter tenor should conditions warrant,” Tetangco said.
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This was the fourth time the BSP has raised the volume of the TDF since it was launched last June 8 with an original volume of P30 billion as part of the shift to the interest rate corridor (IRC) system.
The volume was increased to P50 billion in July, then to P70 billion last Aug. 3, and fourth to P90 billion last Aug. 31, and to P110 billion starting Oct. 5.
For his part, BSP Deputy Governor Diwa Guinigundo said the gradual increase in the volume of term deposits being offered to banks and trust entities is in line with the objective of the IRC to bring market rates closer to the policy rates
“The periodic increase in the auction volume is in keeping with our plan to accelerate the guidance of market rates towards the BSP policy rates. Yes, the bias is towards longer tenors to continue the BSP’s stronger management of domestic liquidity,” he said.
Last June 3, the BSP implemented an operational adjustment reducing the overnight lending rate (formerly overnight borrowing rate) to 3.5 percent from six percent as well as the overnight reverse repurchase rate (formerly overnight lending rate) to three percent from four percent.
