BSP mulls offering more term deposits

The Bangko Sentral ng Pilipinas (BSP) may offer more term deposits due to strong demand from banks and trust entities, resulting in higher yield for the longer-dated debt instrument.

BSP Governor Amando Tetangco Jr. said there is room to raise the volume being offered at the term deposit facility (TDF) every Wednesday as investors continued to shift their funds from the overnight deposit facility (ODF).

“There is room to further increase the auction size going forward so that more funds could migrate from the ODF to the TDF,” he said.

The BSP is set to bid P90 billion worth of term deposits on Sept. 14 and 21.

The BSP has raised the volume of the TDF thrice since the first auction was held last June 8 with an original volume of P30 billion. It was increased to P50 billion in July to P70 billion in August, and to P90 billion last Aug. 31.

Bids for the seven-day term deposits reached P33.32 billion, while tenders for the 28-day term deposits amounted to P162.64 billion yesterday. The BSP made a full award of P10 billion for the sevenday term deposits and P80 billion for the 28-day term deposits.

The seven-day term deposits fetched a 2.5 percent yield, while the longer 28-day term deposits rose to 2.521 percent from last week’s 2.512 percent as accepted yield ranged between 2.5 and 2.525 percent.

“The results of the auction today are not unexpected,” Tetangco said.

As part of the shift to the interest rate corridor (IRC) system last June 3, the BSP is also looking at lowering the reserve re- quirement ratio for banks that is currently pegged at 20 percent.

“An adjustment in the reserve requirement ratio can be considered down the road when, among others, more funds have migrated to the TDF and if credit conditions warrant,” he said.

The BSP is looking at reducing the banks’ reserve requirement within the next couple of months when the close to P1 trillion worth of funds parked at the central bank’s ODF is cut by half.

For his part, BSP Deputy Governor Diwa Guinigundo earlier said market rates are expected to move c los e r to policy rates as funds continued to migrate to the TDF from the ODF.

“The increase in the yield is in line with our expectation that as we mop up more liquidity and migrate funds from ODF to TDF, market rates will be guided towards the BSP policy rate and enhance the effectiveness of monetary policy,” he said.

Robust domestic demand and the benign inflation environment helped the BSP keep policy rates steady since September 2014.