THE weekly volume of P180 billion offered by Bangko Sentral ng Pilipinas in the term deposit auction on Wednesday was slightly oversubscribed as investors’ strong appetite for week-long deposits offset the sluggish demand for the month-long instruments.
Data posted on its Web site showed that total tenders for the auction reached P182.33 billion, or P2.33 billion higher than the weekly volume. The seven-day P40- billion worth of deposits lured total bids of P55.3 billion, with a weighted average accepted yield of 3.24 percent. Bangko Sentral made a full award of P40 billion.
The month-long P140-billion instruments, meanwhile, attracted total bids of only P127.03 billion and fetched a weighted average accepted yield of 3.47 percent. The regulator awarded the total bids of P127.03 billion to investors.
Bangko Sentral officials earlier noted strong demand for the week-long instruments as banks found their relatively high rate more attractive.
Bangko Sentral officials also pointed to the successful issuance of retail treasury bonds by the Bureau of the Treasury recently as the main reason for investors’ less appetite for the month-long term deposits.
The Bureau of the Treasury in April raised a total of P175 billion from its latest issuance of three-year retail treasury bonds, including those generated from roadshows conducted nationwide.
Bangko Sentral Governor Amando Tetangco Jr. cited reports that banks were setting aside funds for their reserve requirement compliance.
Despite the successive undersubscription, Bangko Sentral will keep the weekly volume of P180 billion in its next auction on May 24, 2017. Bangko Sentral early this month increased the week-long volume to P40 billion from P30 billion, while the month-long volume was reduced to P140 billion from P150 billion.
Previous over-subscriptions in 2016 prompted the regulator to increase by P50 billion the weekly volume from the previous P130 billion to P180 billion starting Dec. 1, 2016 to more effectively siphon off excess liquidity in the financial system.
The amount of week-long deposits was increased by P20 billion to P30 billion from P10 billion, while the month-long deposits were increased by P30 billion to P150 billion from P120 billion.
The adjustment on Dec. 1 was the sixth time that Bangko Sentral increased the volume. From the original volume of P30 billion, it was increased to P50 billion, P70 billion, P90 billion, P110 billion, and P130 billion.
Bangko Sentral adopted the interest rate corridor system in June last year so that through calibrated auctioning, the transmission of monetary policy would improve.
On May 16, 2016, Bangko Sentral set the interest rates for the formal shift of its monetary operations to an interest rate corridor that started June 3. The rate on overnight lending facility of 6 percent was reduced to 3.5 percent, 3 percent in the overnight borrowing from 4 percent; while the special deposit account rate of 2.5 percent was kept steady.