BSP looks at raising term deposit yield rate
The Bangko Sentral ng Pilipinas’ (BSP) term deposit auction was oversubscribed for the nineteenth consecutive week on Wednesday, prompting the central bank to say it could open up the possibility of increasing the interest rates for longer maturities.
Data released by the BSP showed the seven-day, P10-billion offer garnered total bids of P35.033 billion, at a bid coverage ratio of 3.5033. The bids for the 28-day, P100-billion offer totaled P196.911 billion, at a bid coverage ratio of 1.9691.
“We continue to see the expected result from the TDF as an active open market instrument. We mop up excess liquidity resulting in the decrease in the bid to coverage ratio. 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,” BSP Deputy Governor Diwa C. Guinigundo said in a text message.
The TDF is a central bank tool to manage liquidity in the financial system where banks and trust entities make a bid for the interest rates which the BSP will pay for them to park their excess funds.
The 30-minute auction is held once a week at 9:20 a.m., with a minimum placement of P10 million.
“The BSP policy rate continues to provide the guidance to market rates and, considering that inflation rate is moving closer to the target and talks about the impending US Fed normalization remain live, the trajectory even for interbank rates is indeed moving towards the policy rate,” Guinigundo noted.
The Philippine Statistics Authority (PSA) reported earlier the inflation rate accelearated at 2.3 percent in September.
“But overall, we should continue to see interest rates remaining broadly low and stable with modest upward drift, and inflation moving towards the midpoint of the target inflation range of 2 to 4 percent. Hence, one can see that indeed current monetary policy settings remain appropriate,” Guinigundo said.
The Monetary Board in its September 22 meeting decided to keep its policy rates unchanged – the overnight borrowing at 3 percent and overnight lending at 3.5 percent, with the special deposit accounts at 2.5 percent, and the reserve requirement ratio of banks at 20 percent. — VDS, GMA News