Term deposits oversubscribed

Intitutional investors flocked the auction for the seven-day term deposits yesterday, prompting the Bangko Sentral ng Pilipinas (BSP) to consider restoring the 28-day paper as soon as the liquidity level in the financial system normalizes after the Christmas season.

Bids for the shorter-dated term deposits amounted to P95.55 billion, more than double the issue size of P40 billion. This was the third straight week that the BSP auction committee did not offer 28-day term deposits.

The central bank has reduced the volume of the term deposit facility (TDF) five times since it was launched in June 2016 as part of the shift to the interest rate corridor (IRC) framework.

The BSP first reduced the volume to P150 billion from P180 billion last September, to P140 billion in October, to P130 billion in November, to P80 billion in Dec. 6 and to P40 billion last Dec. 20 as it dropped the 28-day term deposits in June last year.

The BSP auction committee decided to retain the volume of the TDF at P40 billion consisting only of seven-day term deposits next Wednesday.

The yield of the seven-day term deposits further slipped to 3.3654 percent yesterday from 3.3995 percent last week, with accepted yields ranging from 3.25 to 3.4 percent.

BSP Deputy Governor Diwa Guinigundo said liquidity continues to go back to the banks after the holiday season.

“After the holidays, liquidity goes back to the banks. So they are now more liquid and