Finance


BSP rejects some bids for term deposits anew




Posted on December 29, 2016


THE BANGKO SENTRAL ng Pilipinas (BSP) again rejected some bids for this week’s auction of term deposits as firms sought higher rates, with the auction volume kept steady for the first two weeks of 2017.

Wednesday’s term deposit auction saw banks and trust entities crowd the week-long tenor, while the month-long term was met by bids below offer.

For the second straight week, the BSP rejected a number of bids for the 28-day window, accepting only P110.168 billion against total offers amounting to P111.033 billion. This compares to a P150-billion volume put up for auction this week.

The average yield fetched under the facility reached 3.4646%, hovering close to the interest rate corridor (IRC) ceiling as firms asked for rates between 3-3.5%.

In contrast, banks and trust entities flocked the seven-day tenor as total tenders reached P37.806 billion, slightly above the P30-billion offer. The average rate also trended higher to 3.0441%, coming from bids ranging between 2.95-3.1%.

The term deposit facility (TDF) is the central bank’s main tool in capturing excess liquidity in the local financial system, with the goal of bringing market rates closer to the BSP’s 3% benchmark rate while prodding increased interbank lending.

December auctions saw banks and trust firms scale down the amount of funds they wanted to place under the TDF, coming from a sustained oversubscription over the first five months since the weekly offerings started on June 8.

BSP Deputy Governor Diwa C. Guinigundo said the central bank chose to reject bids under the month-long window after the banks asked for rates way above the 2.5-3.5% range under the IRC.

“It was clear from the beginning -- and the market knows this -- that any bid outside the corridor will not be accepted,” Mr. Guinigundo said in a text message to reporters. “Throw away bids send black noise and those cannot be useful in guiding market rates.”

The BSP is keeping the P180-billion auction size for the first two weeks of January, steady from the December volume which is the highest amount placed on the auction block since the TDF started on June 8.

Broken down, P30 billion will be offered under a week-long tenor, while P150 billion will be up for grabs for a month-long term.

“As to the offered amount, the BSP continues to monitor the level of liquidity in the system and has the flexibility to change the volume it will offer for the TDF depending on the needs of the financial system,” BSP Governor Amando M. Tetangco, Jr. said separately when asked if the BSP is likely to limit weekly auctions to P180 billion.

Mr. Tetangco previously said they are still waiting for the right time to trim the current 20% reserve requirement ratio as banks remain awash with cash. -- Melissa Luz T. Lopez