The Bangko Sentral ng Pilipinas’s (BSP) weekly auction continued to be oversubscribed, fetching higher yields at the start of this month to allow the Monetary Board to maintain the status quo in its policy meeting next week.
Results of Wednesday’s Term Deposit Facility (TDF) Auction showed the yields of both tenors offered moving higher toward the 3-percent main policy rate of the BSP.
In particular, the 29-day tenor moved up to 2.692 percent, from the previous week’s 2.6337 percent. The weighted average accepted yield for the seven-day tenor, meanwhile, was at 2.5189 percent, up from 2.5109 percent in the previous week.
Both the seven-day and the 28-day tenors remain oversubscribed, indicating strong interest from the local banking system. Both tenors have been oversubscribed since the central bank launched the new system.
The amount tendered for the 28-day offer was at P232.8 billion, while the amount offered was at P120 billion.
For the seven-day tenor, the amount tendered was at P29.66 billion, while the amount offered was P10 billion.
Central bank Governor Amando M. Tetangco Jr. said the auction results show there remains “ample” liquidity in the system.
“The price action [i.e., continued healthy uptake in the 28 day] may also be reflective of market conviction that possible US Federal Reserve action would only be after US elections,” Tetangco told reporters.
Tetangco said the results continued to show “no strong reason for making adjustments to policy settings for now.”
“That said, we are mindful of domestic factors that could affect inflation dynamics, including as a result of natural calamities,” the governor added.
Earlier this year when the BSP implemented the interest-rate corridor, the Monetary Board agreed to create a symmetrical corridor for the new system—with the floor at 2.5 percent, and the ceiling at 3.5 percent. The central bank’s main policy rate remains the BSP’s overnight reverse repurchase rate, which is at 3 percent.
The BSP earlier said it expects market rates to move closer to this main policy rate—from its current level, which is nearer the 2.5-percent floor of the corridor—once markets have fully adjusted to the new system.
Earlier, central bank officials said they see this trend of higher yields continuing as they aim to mop up liquidity in the system.
“As we migrate overnight funds into the seven-day and 28-day placements, we see the beginning of a modestly upward path of interest rates for longer maturities,” central bank Deputy Governor for the Monetary Stability Sector Diwa Guinigundo said earlier.