UMVA has learned that the Bangko Sentral ng Pilipinas’ term‑deposit facility delivered a near‑flat average rate on Thursday, yet the auction still sparked fierce investor appetite amid lingering high liquidity and whispers of tighter monetary policy.
The six‑day papers attracted P141.071 billion in tenders, eclipsing the P90 billion offering and surpassing the P138.544 billion bids recorded for the same volume of seven‑day deposits just a week earlier.
Bid‑to‑cover surged to 1.5675 times, up from 1.5394 the previous week, prompting the central bank to fully award its P90‑billion tranche as the average yield remained “broadly stable,” according to the official statement.
Accepted yields for the one‑week deposits narrowed to a 4.00 %–4.477 % band, slightly tighter than the 4.00 %–4.482 % range seen in the prior auction, nudging the average accepted rate for the six‑day papers down by a whisper‑thin 0.02 basis point to 4.443 %.
Market analysts attribute the modest week‑on‑week dip to the shorter six‑day tenor, a shift forced by the non‑working holiday on Wednesday, and to an oversupply of peso liquidity that flooded the system.
Recent declines in global oil prices have also eased inflation pressures, allowing the auction to be oversubscribed despite expectations that the Monetary Board might raise rates again before its June 18 meeting.
Last week, the central bank’s governor hinted at a possible off‑cycle hike, warning that soaring inflation could leave the policy curve lagging behind, especially as second‑round price effects accelerate.
Inflation surged to a three‑year high of 7.2 % in April, prompting the Board to lift the benchmark rate by 25 basis points to 4.5 % in late April to curb broader price spillovers and anchor expectations.
The term‑deposit facility, alongside BSP bills, serves as a key tool to mop up excess liquidity and steer market yields toward the policy rate, a strategy reinforced by the recent absorption of P1.2 trillion in surplus funds since February.
In its latest monetary policy report, the central bank disclosed that it has trimmed TDF offerings to a single tenor, focusing on tenors that sharpen monetary transmission, and has not issued 28‑day deposits for over five years, favoring weekly securities of the same duration.
