MORE RATE HIKES. The rate of the Bangko Sentral ng Pilipinas' (BSP) term deposit facility rises again on Wednesday (June 8, 2022). BSP Deputy Governor Francisco Dakila Jr. traced these developments to expectations for additional rate hikes by the BSP and the Federal Reserve. (Photo from BSP)

MANILA – The rate of the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) rose on Wednesday, but both the seven and 14-day tenors registered oversubscription. 
 
Central bank data showed that the average rate of the one-week facility, which is among the central bank’s excess liquidity mopping tools, increased to 2.3249 percent and the two-week facility’s to 2.3991 percent. 
 
These were at 2.2713 percent for the seven-day TDF and 2.2921 percent for the 14-day TDF during the auction last June 1. 
 
The BSP hiked the offer volume for the seven-day facility to PHP140 billion from last week’s PHP130 billion.
 
The auction committee made a full award. 
 
Total tenders amounted to PHP144.719 billion, resulting in a bid coverage ratio of 1.0337. 
 
On the other hand, the offer volume for the 14-day facility was lowered to PHP160 billion from the previous auction’s PHP170 billion. This tenor was also fully awarded. 
 
Bids reached PHP210.861 billion, bringing the bid coverage ratio to 1.3179. 
 
In a statement, BSP Deputy Governor Francisco Dakila Jr. said “results of the TDF auction reflect market participants’ expectation of a possible rate hike.” 
 
He is referring to the widely expected additional increases in the key rates of the BSP and the Federal Reserve. 
 
Last May, the BSP hiked its key policy rates by 25 basis points to 2.25 percent, from a record-low of 2 percent, for the overnight reverse repurchase (RRP) rate, which was cut by a total of 200 basis points in 2020 as part of the central bank’s pandemic-related measures. The hike was the first since December 2018.
 
The Fed’s key rates have been increased by a total of 75 basis points since last March and are now between 0.75 to 1 percent. 
 
Both the BSP and the Fed cited the accelerating inflation rate as the main reason for the rate hikes.
 
The BSP said the continued recovery of the domestic economy provides it the leeway for the rate adjustment.
 
“Nevertheless, market conditions remain normal amid ample financial system liquidity. Looking ahead, the BSP’s monetary operations will continue to be guided by its assessment of the latest liquidity conditions and market developments,” Dakila added. (PNA)