THE BANGKO SENTRAL ng Pilipinas (BSP) will gradually resume offering term deposits with longer maturities and will bring back its P200-billion offerings under the reverse repurchase (RRP) facility as liquidity improves.

“Consistent with its practice of assessing current financial system liquidity and market conditions in the conduct of its monetary operations, the BSP will gradually reoffer other tenors in its term deposit facility (TDF),” the BSP said in a statement late Monday.

“Similarly, the daily offer volumes in the reverse repurchase facility will be increased at a measured pace. These operational adjustments will begin on 10 June 2020 with the reopening of the 14-day TDF and P200-billion auction offering in the RRP facility,” it added.

The central bank said it will announce weekly the TDF offerings and RRP volumes “as part of its operational adjustment towards the “New Economy.”

“The continued stabilization of liquidity conditions has been observed over the past weeks. Sustained high oversubscriptions in the TDF and RRP auctions indicate that financial market conditions are in place for a gradual normalization in the BSP’s monetary operations. The measured rescaling in the conduct of monetary policy implementation will also provide better guidance to short-term interest rates as the domestic economy slowly reopens,” the central bank said.

“The reconfiguration in the auction volumes and tenors in the TDF and RRP are purely operational measures and remain in line with the stance of monetary policy. Moreover, the BSP stands ready to adjust the details of its operations based on market developments and liquidity conditions.”

The central bank suspended its TDF offerings to support the banking system when the enhanced community quarantine in Luzon was imposed in March. By mid-April, the central bank resumed offering seven-day term deposits. Auctions for the 14-day and 28-day term deposits, however, have remained suspended.

TDF yields have been on a decreasing trend, with the BSP’s offerings being oversubscribed in the past weeks.

Last Wednesday, average rates for the one-week deposits slipped by 0.35 basis point to 2.2543% from the 2.2578% seen the prior week. This, as total bids amounted to P242.052 billion, almost double the P120 billion auctioned and also beyond the P231.351 billion in tenders seen on May 27.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the resumption of auctions of the 14-day deposits is a “good sign” and suggests the central bank is going towards a “level of normalcy.”

“The longer the tenors being demanded and sold means that market may no longer be in panic mode and is more toward a calmer trajectory,” Mr. Asuncion said in a text message. — LWTN

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