Investors swarmed the P180-billion term deposit auction of Bangko Sentral ng Pilipinas Wednesday, indicating the financial system continues to enjoy adequate liquidity.
Bangko Sentral said the auction of seven-day and 28-day term deposits received total tenders of P206 billion.
Data showed the seven-day P30 billion term deposits lured total tenders of P43.569 billion, with a weighted average accepted yield of 2.91 percent and bid coverage ratio of 1.45 percent.
Meanwhile, the 28-day P150 billion deposits attracted total bids of P162.463 billion, with a weighted average accepted yield of 3.1 percent and bid coverage ratio of 1 percent.
“We saw realignment by banks and trust departments, given results of t-bond [Treasury bonds] auction yesterday [rejection of tenders]. Trusts have already hit the required 50-percent winding down of their placements in TDF and ODF by December. Trusts are already compliant with the 50 percent unwinding, so the maturing funds from 7 days and 28 days previously deposited were rolled over,” Bangko Sentral Governor Amando Tetangco Jr. said in a statement Wednesday.
“We will likely continue to see refinements in placements in our facilities such as these. Our view remains that there is sufficient liquidity in the system. Nevertheless, we will continue to monitor bank requirements over the holidays,” he said.
Last week, the P180 billion deposits auctioned was undersubscribed for the first time since June, showing banks’ need for enough liquidity in preparation for the holidays.
The week-long P30-billion deposits only lured total tenders of P15.865 billion, while the month-long P150 billion deposits put on the auction block attracted total bids of P113.214 billion.
Tetangco said the regulator would maintain the current weekly volume of P180 billion but did not rule out the possibility of further adjustments in the future depending on the liquidity condition.
Tetangco said about half of funds previously parked at overnight deposit facilities”•or less than P1 trillion before the start of auctions in June this year”•already migrated to the term deposit facility due to the weekly auctions.
The Monetary Board earlier said a significant reduction in ODF or overnight deposit facilities might trigger a cut in reserve requirement.
Reserve requirement, also called cash reserve ratio, is a central bank regulation used by most, but not all, of the world’s central banks that sets the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves rather than lend out.
In the Philippines, the current reserve requirement ratios are 20 percent for universal and commercial banks, 8 percent for thrift banks and 5 percent for rural banks.
“Because we have to assess the liquidity conditions continuously [before any decision to cut the RR]… That [RR reduction] would be part of the possible policy response…,” Tetangco said.