BSP to resume offering 28-day term deposits

The Bangko Sentral ng Pilipinas (BSP) is reviving the sale of 28-term deposits next Wednesday with the completion of the retail treasury bond (RTB) offering by the national government.

The BSP auction committee decided to increase the volume of the weekly term deposit auction facility (TDF) to P50 billion next week from P40 billion this week by selling P10 billion worth of 28-day term deposits.

The BSP did not auction the 28-day tenor last Wednesday due to the scheduled settlement of the RTBs issued by the Bureau of the Treasury (BTr).

The national government successfully raised P236 bil- lion from the issuance of the five-year RTBs that fetched a coupon rate of 6.25 percent as part of its domestic borrowing program to raise funds to plug the country’s budget deficit.

Both the seven- and 14-day term deposits fetched lower rates last Wednesday amid pronouncements made by the BSP that easing inflation gives authorities some space for policy easing.

The seven-day tenor fetched 5.0214 percent or 1.28 basis points lower than last week’s 5.0342 percent last week, while the yield of the 14-day term deposits eased 4.77 basis points to 5.0975 percent from 5.1452 percent.

Despite the debt issuance by the Treasury, both the sevenand 14 days term deposits were oversubscribed as bids reached P66.34 billion versus the offer size of P40 billion.

Tenders for the seven-day tenor reached P34.29 billion, while bids for the 14-day term deposits amounted to P32.05 billion. The auction committee made a full award of P20 billion for the seven-day tenor and P20 billion for the 14-day term deposits.

BSP Deputy Governor Diwa Guinigundo earlier said there is ample liquidity in the financial system, allowing banks to park their excess funds in the facilities of the central bank including the TDF.

“It still shows the system is liquid, banks have enough surplus funds to place with BSP,” Guinigundo said in a text message.

Last Tuesday, BSP Governor Benjamin Diokno hinted at a possible reduction in the level of deposits banks are required to keep with the central bank by 400 basis points over the next four quarters amid the steady downtrend in inflation.

The country’s reserve requirement ratio (RRR) is the highest in the region despite the 200 basis point reduction to 18 percent from 20 percent last year.

“But if there’s a need, if we have to ease, it’s because it’s our required reserves ratio is very high. It’s one of the highest in the region at 18 percent. I think there’s room for monetary easing. It could be one percentage point every quarter for the next four quarters,” Diokno said.