By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) will resume its weekly auction of its 14-day term deposit facility (TDF) and will be increasing the volume of the daily reverse repurchase facility (RRP) in a bid to gradually normalize both open market operations.
In a statement, the BSP said it will increase the RRP daily volumes at a “measured pace” beginning with P200 billion on June 10, Wednesday. The 14-day TDF, in the meantime, will be offered at only P20 billion initially.
“Consistent with its practice of assessing current financial system liquidity and market conditions in the conduct of its monetary operations, the BSP will gradually re-offer other tenors in its TDF. Similarly, the daily offer volumes in the RRP facility will be increased at a measured pace,” said the BSP.
The BSP noted the “stabilization of liquidity conditions” of past weeks as evidenced by the “sustained high oversubscriptions in the TDF and RRP auctions” which it said signals that the market is ready for gradual normalization of open market operations.
“The measured rescaling in the conduct of monetary policy implementation will also provide better guidance to short-term interest rates as the domestic economy slowly reopens,” the BSP added.
The BSP also said that the volume reconfiguration for the RRP and TDF are “purely operational measures and remain in line with the stance of monetary policy.”
“(The) BSP stands ready to adjust the details of its operations based on market developments and liquidity conditions. Henceforth, the BSP will announce on a weekly basis the TDF offerings and RRP volumes as part of its operational adjustment towards the ‘New Economy’,” said the central bank.
For this week’s TDF, the BSP is reopening the 14-day with an initial offer of P20 billion while the 7-day will be offered at P120 billion, lower than the June 3’s P170 billion volume.
To better manage liquidity during the lockdowns, the BSP suspended of the 14- and 28-day TDF and also reduced its offering of overnight RRP. The 14- and 28-day TDF was last bid on March 18. The BSP has yet to reopen the 28-day TDF.