Term deposit yields drop
TERM DEPOSITS offered yesterday saw lower yields as banks continued to swarm the weeklong tenor as the market remains awash with liquidity, with the central bank seeing no need to tweak auction volumes so far.
Banks continued to swarm the seven-day term deposits placed on the auction block on Wednesday to account for roughly a third of the total P179.962- billion demand, versus the P180 billion offered by the Bangko Sentral ng Pilipinas (BSP).
Firms wanted to place as much as P68.564 billion under the week-long tenor, which was more than the P40-billion volume that the central bank wanted to accept and the P55.302 billion in total bids received during the May 17 auction. As a result, the average yield went down to 3.1918% from the 3.2468% rate fetched last week.
On the other hand, the 28-day tenor remained undersubscribed as it attracted P111.128 billion worth of tenders versus the P140 billion which the BSP wanted to auction off. The average rate moved sideways to 3.476% from 3.4764% the previous week, as banks sought for margins ranging from 3.35%-3.5%.
Sought for comment, BSP Governor Amando M. Tetangco, Jr. said the auction results showed that the financial market remains awash with cash, although strong corporate borrowings likely tempered the demand for the monthlong instruments.
“There continues to be sufficient liquidity in the system, particularly for the seven-day tenor which was oversubscribed again. There continues to be strong interest in the short end of the curve,” Mr. Tetangco told report-
ers on the sidelines of a Financial Executives of the Philippines event in Makati City.
Mr. Tetangco said the continued under subscription for the 28-day tenor likely reflected the increased lending by banks to corporate clients during the past week, alongside the winding down of placements by trust companies scheduled by end-June.
Looking ahead, the BSP chief said the monetary authority sees no pressing need to adjust the term deposit facility (TDF) settings at present, with the auction amounts remaining “appropriate” for current liquidity conditions.
The central bank again kept the auction volume at P180 billion for next week’s offering, broken down into P40 billion for the week-long term and P140 billion under the month-long tenor.
BSP Deputy Governor Diwa C. Guinigundo said he expects TDF yields to trend closer to 3% over the coming months, or around the central bank’s benchmark borrowing rate.