BSP trims 28-day term de­posit of­fer vol­ume on weak de­mand

Business World - - BANKING & FINANCE - By Melissa Luz T. Lopez Se­nior Re­porter

THE CEN­TRAL BANK has trimmed the weekly term de­posit auc­tion vol­ume for Septem­ber af­ter de­mand for month- long tenor con­sis­tently re­mained be­low of­fer for the past months, as banks opted to chan­nel their ex­cess funds to loans and in­vest­ments.

Banks can only bid for as much as P110 bil­lion worth of 28- day term de­posits by Sept. 6 af­ter the Bangko Sen­tral ng Pilip­inas (BSP) re­duced the of­fer­ing amid tepid de­mand for the longer tenor. On the other hand, the vol­ume of seven-day in­stru­ments will re­main at P40 bil­lion, with the weekly to­tal at P150 bil­lion.

This breaks nine straight months of the BSP’s P180-bil­lion of­fer­ing which was first set in De­cem­ber.

Wed­nes­day’s auc­tion saw both the week- long and month- long tenors go un­der­sub­scribed as to­tal ten­ders scraped P142.29 bil­lion, drop­ping from the pre­vi­ous week’s P158.171 bil­lion and again set­tling be­low the to­tal of­fer­ing.

The seven-day tenor saw pale de­mand as bids to­talled P32.435 bil­lion, down from the pre­vi­ous week’s P40.836 bil­lion and fail­ing to fill the P40 bil­lion which the BSP wanted to sell. The av­er­age yield moved side­ways to 3.3162%, a tad higher than the 3.3124% seen a week ago.

Ten­ders for the 28-day in­stru­ments also fell to P109.855 bil­lion com­ing from P117.335 bil­lion pre­vi­ously, log­ging be­low the P140­bil­lion of­fer since April.

De­spite this, rates sought by the banks stead­ied at 3.4961% yes­ter­day, com­pared to 3.4958% fetched dur­ing the Aug. 23 exercise.

Play­ers sought for re­turns rang­ing from 3.45-3.5%, hov­er­ing near the ceil­ing rate set by the BSP.

The term de­posit fa­cil­ity (TDF) is the cen­tral bank’s main tool to cap­ture ex­cess money sup­ply in the fi­nan­cial sys­tem, where banks can park idle funds for a small re­turn.

The re­duced vol­ume also comes two months af­ter trust en­ti­ties stopped bid­ding for term de­posits fol­low­ing cen­tral bank rules, which ef­fec­tively re­duced the amount of de­ploy­able funds for the TDF.

BSP Gov­er­nor Nestor A. Espe­nilla, Jr. de­scribed the move as an “op­er­a­tional re­fine­ment” in or­der to re­flect the con­tin­ued un­der sub­scrip­tion ob­served for the month-long tenor.

Pressed fur­ther, BSP Deputy Gov­er­nor Diwa C. Guini­gundo said the trend in the turnout of the weekly TDF auc­tions pointed to the need to re­cal­i­brate the vol­ume of­fer­ings in or­der to bet­ter re­flect the amounts which banks can place un­der the fa­cil­ity.

“The de­ci­sion to re­duce the vol­ume of­fer­ing for the 28- day

TDF is based on the recog­ni­tion that the sus­tained eco­nomic ex­pan­sion has also given rise to higher de­mand for credit. Banks are now lend­ing more to their clients in­stead of plac­ing their ex­cess funds with the BSP,” Mr. Guini­gundo said in a text mes­sage to re­porters, adding that the lenders also used the ex­tra cash to buy dol­lars for their im­port re­quire­ments and pre­pay for­eign debts.

He noted, how­ever, that do­mes­tic liq­uid­ity re­mains am­ple.

“Thus, it is the ex­cess liq­uid­ity of the banks that has de­clined re­cently and not the do­mes­tic liq­uid­ity per se,” Mr. Guini­gundo added.

“BSP there­fore does not have to do as much mop­ping up as be­fore be­cause funds are be­ing used for pro­duc­tive uses in­stead of just be­ing parked with the BSP.”

Do­mes­tic liq­uid­ity grew by 13.2% in June along­side a 19% surge in bank lend­ing, ac­cord­ing to lat­est cen­tral bank data.

Newspapers in English

Newspapers from Philippines

© PressReader. All rights reserved.