Seven-day term deposits oversubscribed at auction
THE CENTRAL BANK’S auction of term deposits showed sustained preference for the week-long tenor yesterday, with the P180-billion weekly offering maintained for January as rates continue to trend higher.
Term deposits auctioned by the Bangko Sentral ng Pilipinas (BSP) on Wednesday saw bids go above the offer for the seven-day tenor, while the P150-billion bid out under a month- long term was met with underwhelming demand.
Banks and trust companies again swarmed the P30- billion offering for seven-day term deposits, with total tenders reaching more than double to P64.538 billion. The average yield likewise crept up to 3.0279%, picking up from the past week’s 2.9976% as firms sought for rates ranging from 2.95-3.075%.
In contrast, the P150 billion auctioned under the 28-day tenor was barely filled, with bids totalling just P137.462 billion yesterday. Still, the average rate crept up to 3.4317%, coming from a 2.53.5% range.
The term deposit facility (TDF) is the central bank’s main tool in capturing excess liquidity in the local financial system, with the goal of bringing market rates closer to the BSP’s 3% benchmark rate while inspiring increased interbank lending.
December auctions saw banks and trust firms scale down the amount of funds they wanted to place under the TDF, coming from a sustained oversubscription over the first five months since the weekly offerings started on June 8.
BSP Governor Amando M. Tetangco, Jr. previously said that there was an observed preference for the week-long tenor as banks opted to hold more money to respond to high demand for cash in light of the Christmas season, coupled with “market cautiousness” in light of the US Federal Reserve’s policy decision during its Dec. 13-14 meeting.
Trust firms also reduced their placements under the BSP facility this month, in line with their agreement with the central bank that they will gradually phase out their use of the window by endJune 2017.
The central bank has decided to keep the auction amount at P180 billion next week and for its Jan. 4 offering. Broken down, P30 billion will be auctioned under a week-long term and P150 billion for a month’s term.
Mr. Tetangco also said last week that there are currently no plans to introduce new tenors or to hold additional auctions, with the BSP sticking to the week-long and month- long terms offered every Wednesday. He added that it was not yet time to trim the 20% reserve requirement ratio imposed on banks. —