Weaker appetite for term deposit auction

TERM DEPOSITS on auction saw weak demand yesterday as both the week-long and monthlong tenors received bids below offer, with the central bank taking a closer look at liquidity conditions to possibly tweak auction settings.

Tenders for the term deposit facility ( TDF) scraped P124.38 billion on Wednesday, slipping from last week’s P160.647 billion and well below the P180 billion dangled by the Bangko Sentral ng Pilipinas ( BSP). In turn, yields fetched during the auction climbed from the previous week.

Banks wanted to place only P35.238 billion under the sevenday tenor, lower than the BSP’s P40- billion offer and coming from last week’s tenders worth P44.378 billion. This drove the average rate to 3.2597%, the highest fetched a 3.2756% average tallied during the May 10 auction.

The firms sought for returns ranging from 3.1%- 3.39% for placing their excess funds under a week-long lock-in period.

Offers for the 28- day term deposits also remained undersubscribed with total bids at P89.142 billion, or just 64% of the P140- billion auction volume. It was likewise lower than the P116.269- billion bids received during the July 12 offering.

Rates likewise climbed to 3.4948% from 3.4892% previously, hovering closer to the BSP’s 3.5% ceiling.

The TDF is the central bank’s main tool to arrest excess money supply in the financial system by allowing banks to place their idle funds with the BSP — or those which are not used for loans or set aside as reserves — in exchange for a small return.

Only banks can participate in the weekly central bank auctions since July, as the one-year leeway given to trust firms has been lifted effective June 30.

BSP Governor Nestor A. Espenilla, Jr. said the central bank would have to check whether the newest TDF results form part of a broader trend of tightening liquidity conditions and adjust monetary tools accordingly.

“We need to carefully analyze [ yesterday’s] TDF auction results as well as the trend of recent results, whether the results are readily explained by temporary and self- correcting reasons or we should already consider refinements to some of our policy settings,” Mr. Espenilla said in a text message to reporters when sought for comment.

For next week, the central bank kept the auction volume steady at P180 billion, with the amount last adjusted in December. —