The Bangko Sentral ng Pilipinas (BSP) said liquidity in the system is just right and at a “healthy” level, as evidenced by the latest results of the monetary authority’s weekly auction on Wednesday.
Term deposit facility (TDF) auction results showed the banks and trust entities continued strong interest in the central bank’s seven- and 28-day term deposit offer, with both remaining oversubscribed this week.
In particular, the amount tendered for the shorter tenor totaled P37.88 billion, exceeding the P30 billion offered for the week by the central bank.
The longer tenor of 28 days, meanwhile, attracted P171.3 billion, instead of the P150 million offered for the week.
Rates, meanwhile, remained broadly stable, with both tenors remaining above the main policy rate of the central bank.
In particular, the seven-day tenor generated yields averaging 3.0021 percent this week—down from the 3.0103 percent last week. The 28-day tenor, meanwhile, fetched yields averaging 3.3929 percent, down from 3.4007 percent last week.
Central Bank Governor Amando M. Tetangco Jr. said the oversubscription, indicative of the state of liquidity in the system and the down trending rates, was not entirely unexpected as money supply remains just enough to support continued economic expansion this year.
“The auction results show there is still good demand for short-dated TDF placements [seven days and 28 days], even as the bid-to-cover ratios are lower than last week’s,” Tetangco said.
“Investors remain on the lookout for short-dated paper with good yields,” he added.
The monetary authorities endeavor to strike a balance between just the correct amount of peso liquidity in the system to feed the need of the economy to expand without having to fan inflationary fires lit by sudden or unexpected price hikes.
Such a balance is crucial because the opposite event, in which liquidity is relatively scarce, results to an economy not quite able to deliver the punch needed for the $292-billion economy to move forward.