Bangko Sentral trims next week’s term deposit offer due to holidays

By Melissa Luz T. Lopez, Senior Reporter
THE CENTRAL BANK has trimmed the volume for next week’s term deposit auctions, in anticipation of upcoming holidays which could leave banks opting to hold more cash.
Term deposits to be offered by the Bangko Sentral ng Pilipinas (BSP) on Wednesday will be reduced to P90 billion, down by P20 billion from this week’s P110-billion offer.
Broken down, auction amounts were lowered for the one-week and two-week tenors. Only P40 billion will be issued under the seven-day term, down from this week’s P50 billion. The volume for the 14-day term deposits will also be slashed to P30 billion from P40 billion for the April 25 exercise.
Meanwhile, the central bank will still float P20 billion under a 28-day term for the fourth straight week.
BSP Governor Nestor A. Espenilla, Jr. said the cut in the auction amounts is “temporary,” as the reduced volumes are timed ahead of upcoming holidays.
Financial markets will be closed on May 1 in observance of Labor Day. May 14 will also be a national holiday for the barangay and Sangguniang Kabataan elections.
The amounts will be “back to usual” after the break, Mr. Espenilla said in a WhatsApp message to reporters.
The term deposit facility (TDF) is currently the central bank’s primary tool in capturing excess funds in the local financial system. The BSP expects to keep market rates closer to the 3% benchmark rate by paying margins to banks who decide to park unused cash under the window.
Market rates usually drop if banks are sitting on idle funds.
The BSP is also relying on the weekly TDF auctions to mop up additional liquidity after the reserve requirement ratio imposed on universal and commercial banks was lowered to 19% of deposits starting March 2.
Banks wanted to place P112.07 billion under the three instruments this week, lower than the P133.034 billion tenders received a week ago but a tad higher than the P110 billion offered by the central bank.
Wednesday’s auction saw banks preferring the seven-day instruments, which resulted in a slight undersubscription for the 14-day tenor. Yields saw mixed movements as average rates for the one-week and two-week tenors climbed, while the 28-day notes saw a slight drop in returns.