Central bank cuts TDF offerings as demand continues to weaken
THE CENTRAL BANK will not offer month-long term deposits next week amid feeble demand for these instruments, with market players preferring the shorter tenor as they expect higher global yields and bigger cash requirements for the holidays.
The decision came as bids received during yesterday’s offering declined further to P71.925 billion yesterday from the P74.109 billion recorded the previous week. This settled below the P80 billion the Bangko Sentral ng Pilipinas (BSP) wanted to sell.
Banks offered to place P38.92 billion under a seven-day term, slipping from P41.269 billion in tenders received a week ago and below the P40- billion offering. Despite the narrower demand, the average yield sought by the firms climbed to 3.4542% from last week’s 3.4171%.
The 28-day tenor likewise saw tepid demand at just P33.005 billion, failing to maximize the P40 billion placed on the auction block even as it inched up from P32.84 billion during the Dec. 6 offering. Rates steadied at 3.4954%, compared to 3.494% previously.
The term deposit facility (TDF) is currently the central bank’s main tool to capture excess money supply in the financial system by allowing banks to place extra cash they hold, in exchange for a small return.
BSP Deputy Governor Diwa C. Guinigundo said recent liquidity forecasts done by the monetary authority showed that lenders had smaller amounts to place under the TDF, which inspired the drastic cut in the auction volume.
For Dec. 20, the central bank slashed the auction volume to P40 billion in seven- day papers, and will offer none under the 28- day tenor. This offering is the smallest since the P30 billion offered back in June last year when the weekly TDF auctions started.