BSP resumes sale of 28-day term deposits
(The Philippine Star) – May 14, 2019 – 12:00am
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is set to resume the offering of the 28-day tenor at the term deposit auction facility (TDF) tomorrow as liquidity continues to return to the market.
The BSP auction committee has decided to offer P10 billion worth of 28-day term deposits tomorrow, bringing the total volume of the liquidity absorption facility to P40 billion including P20 billion worth of seven and P10 billion worth of 14-day term deposits.
The committee had scrapped the 28-day term deposits for the last seven weeks due to the tight liquidity in the financial system, arising from the fund raising activity by the Bureau of Treasury, the tax payment season as well as the long holidays.
The debt instrument fetched 5.0987 percent when it was last offered on March 20.
Latest data showed the level of liquidity in the financial system recorded the weakest growth in more than six years at 4.2 percent to P11.38 trillion in end-March.
The yield of the seven-day term deposits eased for the fifth straight week, declining by 3.69 basis points to 4.7198 percent last Wednesday, while rate for the 14-day tenor likewise slipped by 2.65 basis points to 4.7524 percent.
Both tenors were oversubscribed as banks expected the BSP’s Monetary Board to unwind its tightening cycle due to easing inflation as well as slower economic growth.
Inflation eased for the sixth straight month to a 16-month low of three percent after peaking at 6.7 percent in September and October, while the country’s gross domestic product (GDP) growth slowed down to the slowest level in four years at 5.6 percent in the first quarter from 6.3 percent in the fourth quarter.
Last Thursday, the Monetary Board slashed interest rates by 25 basis points, reversing a tightening episode that saw benchmark rates rise by 175 basis points from May to November last year to prevent inflation from spiralling out of control.
BSP Governor Benjamin Diokno said monetary authorities are set to discuss the level of deposits banks are required to keep with the central bank or the reserve requirement ratio (RRR) this week.
Last year, the BSP slashed the RRR level by 200 basis points in March and June to 18 percent from 20 percent, releasing P190 billion in additional funds into the financial system to support the growing economy.
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