BANKS and trust entities showed less interest in the Bangko Sentral ng Pilipinas’s (BSP) 28-day term deposits, as bids were reported to be undersubscribed on Wednesday for the first time in the auction facility’s history.
In particular, the amount tendered in the shorter tenor hit P39.19 billion, exceeding the P30 billion offered by the Central Bank for the week.
As for the longer tenor of 28 days, bids reached P140.76 billion, out of the P150 million offered for the week—the first undersubscription for the facility since its inception.
The low bid outcome for the longer tenor caused the bid coverage ratio to drop below 1 during the week at 0.9384.
Rates remained broadly stable, with both tenors still hovering around the Central Bank’s main policy rate.
In particular, the seven-day tenor fetched yields at 2.9896 percent, while the 28-day tenor’s was at 3.3028 percent.
BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo said the apparent lack of interest in the longer-term tenor is not an indicator of tighter liquidity conditions, but of the banks’ preference for shorter-term tenors.
“It’s true the bid to cover ratio for the 28-day TDF [term deposit facility] has dropped to less than one, but that does not necessarily imply that market liquidity is tightening. There is more preference for the seven-day instrument because the market is positioning for any opportunistic short-term propositions,” Guinigundo told reporters.
“Should there [be] actual liquidity tightening, all that the banks have to do is to withdraw from the liquidity facilities of the BSP to fund loans, investments, foreign-exchange purchases and even public spending on power and infrastructure,” he added.
TDF auction results showed banks and trust entities still showed strong interest in the Central Bank’s seven-day term deposit offer, which was still oversubscribed during the week.