TERM DEPOSITS on offer yesterday saw stronger demand and pushed yields lower from a week ago, as banks remain awash with cash.
Bids received for Wednesday’s term deposit auction totalled P180.174 billion, picking up from the previous week’s P174.847 billion, to match the P180 billion which the Bangko Sentral ng Pilipinas (BSP) wanted to auction off.
However, a third of the tenders vied for the week-long placements, leaving the month-long tenor barely filled.
Offers for the seven-day tenor recovered to P60.818 billion from P52.579 billion last week and logging well above the P40 billion which banks can vie for. The higher amount of tenders drove the average yield down to 3.3327%, coming from 3.3345% a week ago as banks sought for returns ranging from 3.3-3.375%.
Meanwhile, demand for the 28-day term deposits posted a slight slip to P119.356 billion from P122.268 billion previously, again barely filling the P140-billion offering. In turn, the average rate went down to 3.4936% from 3.4949% a week ago as the bids stood steady.
The term deposit facility (TDF) is the central bank’s main tool to arrest excess money supply in the financial system by allowing banks to place their excess funds with the BSP for a small return. These idle sums are those not deployed for loans or set aside as bank reserves.
Since July, only banks can tap the central bank window as the one-year leeway extended to trust companies was lifted on June 30.
As a rule, the financial firms can ask for rates ranging from 2.5-3.5%, matching the current spread of borrowing rates imposed by the BSP since June 2016.
BSP Deputy Governor Diwa C. Guinigundo previously said that the Philippine financial system remains liquid despite the trend undersubscription in the month-long tenor, adding that trust funds plucked out of the TDF have found its way back through their parent banks.
Banks also chose to hand out more loans, buy more dollars, and raise their placements on government-issued debt papers to make better use of their excess liquidity.
Tuesday’s auction of seven-year Treasury bonds saw total bids reach P33.885 billion, more than double the P15 billion which the Bureau of the Treasury wanted to sell.
Yields at that auction also went down to 4.51%, a tad lower than the 4.519% quoted during the past exercise.
Traders have pointed out that market players continue to prefer instruments which come in shorter tenors, reflecting cautious stance ahead of future rate hikes in the United States.
The BSP kept the auction volume steady at P180 billion for next week, split into P40 billion under the week-long term and P140 billion under the month-long tenor. — Melissa Luz T. Lopez