BSP Resumes 28-day Term Deposits

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) will resume offering the 28-day term deposits starting next week.

While the return of significant liquidity in the market continue to ease due to the seven-day term deposit, the BSP auction committee decided to offer a 28-day term deposit on Feb. 7.

Last December 13, BSP offered P40 billion worth of the longer-dated term deposit. The total offering will be raised to P60 billion, consisting the seven-day tenor and with the remaining P20 billion initial volume that the BSP decided as they resume the 28-day term deposit once again.

After the Bureau of Treasury raised P255 billion from the issuance of retail treasury bonds, the central bank stopped the auction of the 28-day term deposits for the meantime last December 20 because of the tight market conditions since the banks needed more cash due to the high demands during Christmas holidays.

Diwa Guinigundo, BSP Deputy Governor, said: “The BSP has more liquidity to bring back to its term deposit auction facility on top of the overnight deposit facility and the reverse repurchase facility and in the process ensure [an] appropriate level of domestic liquidity and price stability.” He also stated that the central bank notices the effect of the maintained release of public funds for infrastructure and other projects and the return of liquidity that continues after the holiday season.

According to Guinigundo, as the market players continue to show their interest in the 28-day term deposits, a continuous adjustment will occur in the TDF volume.

In the continuation of the 28-day term deposit, P60 billion worth of term deposits including the P40 billion worth of seven-day term deposits schedules to bid out next week by BSP.

The interest rate for the seven-day term deposit got lower as it gathered 2.7785 percent from 2.9256 percent as the accepted return ranged from 2.7 to 2.85 percent last week. Banks resumes to take up the shorter-dated term deposits, and because of this, the yield of seven-day term deposits eased for the seventh straight week.

The central bank drew P116.63 billion in bids during Wednesday’s auction for the P40 billion TDF.

Nestor Espenilla Jr., BSP Governor, noted that there is substantial overall demand for term deposit as shown by the unchanging strong bids corresponding to offer.

“We’re feeling out the tenor preference and, we will adjust supply accordingly in future auctions to meet our interest rate corridor objectives,” Espenilla noted.

The Term Deposit Facility, or TDF, is a facility introduced and used by the BSP as a liquidity absorption for liquidity management. To lead market rates closer to the BSP policy rate and to enhance central bank’s influence on market rates, its task is to withdraw a large part of the structural liquidity from the financial system as part of the shift to the IRC.

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The Stock Signals Philippines is the online news media arm of Equilyst Analytics. Inc., an SEC-registered stock market consultancy firm in the Philippines that guides Filipinos on long-term investing and short-term trading and offers mentoring services.

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