THE P180 billion worth of term deposits offered by Bangko Sentral ng Pilipinas on Wednesday remained highly oversubscribed as banks and trust entities swarmed the auction amid excess liquidity in the financial system.
Data showed that the seven-day P30 billion deposits lured total bids of P59.172 billion and fetched a weighted average accepted yield of 3.03 percent, matching the policy rate of Bangko Sentral. The 28-day deposits worth P150 billion, meanwhile, attracted total tenders of P181.29 billion with a weighted average accepted yield of 3.43 percent.
The P180-billion deposits offered were oversubscribed by over P60 billion.
“Ahead of FOMC (Federal Open Market Committee meeting) tonight, there is market preference for the shorter tenor, even as it is widely expected that the Fed will keep rates steady,” Bangko Sentral Governor Amando Tetangco Jr. said in a text message to reporters.
“Just like the market, we will look out for the Fed’s assessment of labor conditions and outlook on inflation. We will take any relevant information into consideration in our own assessment of domestic inflation dynamics at our policy meeting next week,” Tetangco said.
Bangko Sentral Deputy Governor Diwa Guinigundo earlier said the weekly P180-billion volume would be kept for the meantime as 2017 was seen to be a tough year for financial markets. One thing to consider, he said, would be the expected three interest rates hike by the US Federal Reserve this year.
The auction calendar for the first quarter 2017 showed that the P180-billion weekly volume would be maintained during the auction set for the month of February.
Previous over-subscriptions prompted the regulator to increase the weekly volume by P50 billion 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 raised 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.
The US Fed in December raised interest rates for the first time in a year, and only the second time since the 2008 financial crisis on economic recovery and lower unemployment. The previous rate increase occurred in December 2015 when the benchmark rate was lifted from near-zero for seven years since the crisis.
Earlier, Bangko Sentral Governor Amando Tetangco Jr. ruled out the possibility of reducing the current reserve requirements of banks despite siphoning off significant amount of liquidity previously parked at overnight facilities since the start of the interest rate corridor system in June 2016, saying it was “not the time to reduce the RR.”
