By Melissa Luz T. Lopez, Senior Reporter
YIELDS on term deposits inched lower yesterday as market players swarmed the central bank’s offering with overwhelming bids across all tenors.
Demand for the short-term deposits reached P129.006 billion on Wednesday, well above the P100 billion offered by the Bangko Sentral ng Pilipinas (BSP) and rising from the P125.157 billion received during last week’s auction.
Tenders also improved for the longer tenors to mark a second straight week above offer.
Seven-day term deposits shored up P49.382 billion placements to settle above the P40 billion which the central bank wanted to sell. However, this is a marked decline from the P58.556 billion bids logged during the July 4 exercise.
Despite softer demand, average rates still settled lower at 3.7537% versus the 3.7779% fetched a week ago, coming from a narrow range of 3.625-3.795% sought by market players.
On the flipside, banks had bigger bets for the 14-day tenor as they offered to place as much as P51.39 billion, surging from the P44.335 billion in bids received last week to again log above the P40-billion offering of the BSP.
The strong demand pushed yields lower to average 3.9258% against the 3.9309% accepted a week ago.
Offers for the 28-day deposits also went up to P28.234 billion, improving from P22.266 billion previously to remain above the P20 billion on the auction block.
Strong appetite for the month-long papers pulled yields down to 3.9346% from the record 3.9442% tallied last week, which hovered close to the 4% ceiling.
“TDF has been fully subscribed… It means we are able to mop up the amount of so-called excess liquidity in the market,” BSP Deputy Governor Diwa C. Guinigundo told reporters on Tuesday.
The TDF stands as the central bank’s main tool in capturing excess money supply in the financial system. The BSP actively adjusts auction amounts each week in order to bring market and interbank rates within its desired spread, which currently ranges from 3-4%.
The Monetary Board introduced back-to-back increases in benchmark rates during their May and June policy meetings in order to temper inflation expectations, as price increases have been trending higher than their 2-4% target over the past few months.
Inflation has averaged 4.3% as of June following a 5.2% pace clocked in last month, with the central bank saying it sees the pace quickening further to peak between July-September. By next year, inflation is seen to average 3.3%.
Some market watchers have been pointing out that the BSP has been behind the curve as it kept interest rates low for far too long. Meanwhile, other economists point out that inflation remains supply-driven by way of rising world crude oil rates and a shortage of rice supply, which had little to do with interest rates set by the monetary authority.
Next week, the BSP will offer another P100 billion in term deposits to banks. Offer volumes for each term will remain at P40 billion apiece in the seven- and 14-day deposits and P20 billion in the 28-day tenor.