Overnight RRP auction oversubscribed

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Mactan Island, Cebu: The central bank said the results of the first auction for its overnight reverse repurchase (RRP) facility under the interest rate corridor (IRC) system indicated strong interest from banks.

The Bangko Sentral ng Pilipinas (BSP) reported that the June 3 auction, which is also the start of the IRC implementation, was oversubscribed.

“Total tenders stood at P574.072 billion, significantly higher than the P305 billion offered,” BSP Deputy Governor Diwa Guinigundo announced over the weekend during the 12th BSP Lecture Series held here.

As part of the reforms in the monetary operations, the BSP transformed the RRP facility to purely overnight facility, offered using a fixed-rate and full allotment method.


Also, the special deposit account and repurchase facilities were converted to overnight standing liquidity windows, available on demand during BSP business hours.

On May 16, the central bank set the interest rates for the formal shift of its monetary operations to an interest rate corridor starting June 3.

The rate on the overnight lending facility of 6 percent was reduced to 3.5 percent; 3 percent in the overnight borrowing rate from 4 percent; while the special deposit account rate of 2.5 percent was kept steady.

The term deposit auction facility is seen to have a rate between that of the RRP and overnight deposit facility such that the weighted rate for monetary operations will remain broadly the same.

The first auction under the facility is set on June 8 where P30 billion worth of term deposits will be offered to the public.

Of the P30 billion total volume offering, P10 billion is for a 7-day tenor, while P20 billion is for a 28-day tenor.

The second TDF auction is scheduled on June 15 with P30 billion total volume offering, where seven-day tenor deposits account for P10 billion, while 28-day tenors amount to P20 billion.

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