Term deposits attract demand
TERM DEPOSITS offered by the Bangko Sentral ng Pilipinas (BSP) yesterday saw strong demand, although greater preference was seen for the week-long tenor amid lingering uncertainties in the global market.
Both the seven-day and 28-day term deposits went oversubscribed during Wednesday’s auction, although banks and trust firms mostly wanted to get a hold of the shorter- termed instruments.
Bids for the week- long term deposits reached P59.172 billion, nearly twice the P30 billion offered by the central bank. The average yield hit 3.0306% as banks sought for rates ranging from 3-3.05%. This was slightly higher than the 3.0269% fetched a week ago.
The P150 billion offered by the central bank under the month- long term was likewise met with overwhelming demand at P181.291 billion, as the average rate hit 3.432%. This went down from the 3.4338% yield fetched a week ago, as the banks sought lower margins within 3.3-3.47%.
The term deposit facility (TDF) is the central bank’s main tool in capturing excess money supply in the local financial system, with the goal of bringing market rates closer to the BSP’s 3% benchmark rate while also prodding increased interbank lending.
FED EFFECT
BSP Governor Amando M. Tetangco, Jr. said the TDF results illustrated the “wait-and-see” stance taken by investors ahead of the United States Federal Reserve’s policy meeting this week, coupled with jitters amid global market developments.
“Ahead of FOMC ( Federal Open Market Committee) meeting tonight, there is market preference for the shorter tenor, even as it is widely expected that the Fed will keep rates steady,” Mr. Tetangco said in a text message to reporters.
The Fed was set to conclude a two- day policy meeting yesterday, although market players expected US policy makers to remain on hold after a 25-basispoint increase introduced in December.
Looking ahead, Mr. Tetangco said they will remain watchful of US and international events
ahead of their own policy review on Feb. 9.
“Just like the market, we will look out for the Fed’s assessment of labor conditions and outlook on inflation. We will take any relevant information into consideration in our own assessment of domestic inflation dynamics at our policy meeting next week,” the BSP chief said.
The central bank will keep the TDF volume at P180 billion for the next two weeks, unchanged since the amount was last set in December.
The BSP has kept policy settings unchanged since September 2014, save for “procedural” cuts introduced in June last year to usher in the migration to an interest rate corridor.