Term deposit volume back to normal

The Bangko Sentral ng Pilipinas (BSP) has raised the volume of the term deposit auction facility (TDF) to P80 billion as banks continue to pick up shorter-dated term deposits with the expected rate hike today.

The BSP auction committee yesterday decided to increase the volume by P20 billion starting May 16 from P60 billion.

Banks continued to park excess liquidity in the TDF with both the seven and 14day tenors oversubscribed at yesterday’s auction. The reduced P60 billion offering was oversubscribed as bids reached to P92.11 billion.

Tenders for the P30 billion seven-day term deposit offering amounted to P53.02 billion, while the 14-day tenor was likewise oversubscribed at P33 billion versus the issue size of P20 billion.

On the other hand, the P10 billion 28-day term deposits offering was undersubscribed as only P6.09 billion worth of tenders were received.

BSP Deputy Governor Diwa Guinigundo said the market’s preference for shorter tenors remain driven by its expectation of a BSP rate hike and higher demand for funds for the May 14 barangay election.

The volume of the TDF has been raised to P110 billion from only P40 billion at the start of the year with the launch of the 14-day tenor and the reintroduction of the 28-day term deposits. The increase was aimed at siphoning off the additional P90 billion in excess funds released into the financial system after the BSP slashed the level of deposits banks are required to keep with the central bank.

The BSP reduced the reserve requirement ratio for banks to 19 percent from 20 percent effective last March 2.