Demand shifts to BSP deposit facility’s longer tenors

DEMAND for term deposits shifted towards longer tenors this week, pushing yields higher for some tenors as banks wanted bigger returns for such placements.

Bids under the term deposit facility (TDF) reached P133.034 billion yesterday, settling above the P110 billion offered by the Bangko Sentral ng Pilipinas ( BSP) and picking up from the P124.31 billion received the previous week.

Wednesday’s auction saw a shift in market preference as players wanted to park more funds under the two-week tenor, which has surpassed demand for the one-week instruments.

Banks wanted to place only P47.105 billion under a seven-day term, lower than the P50 billion placed on the auction block and the P65.133 billion tenders posted a week ago. The tempered demand drove the average yield higher to 3.3018%, which inched up from 3.2657% previously.

BSP Deputy Governor Diwa C. Guinigundo attributed the belowoffer bids for the 14- day tenor to banks’ anticipation of bigger demand for money ahead of the annual tax payment deadline on April 15.

On the other hand, demand for 14-day deposits nearly doubled to P55.805 billion from just P29.935 billion the prior week, surpassing the BSP’s P40 billion offering. As a result, rates sought by lenders climbed to 3.4053% from 3.3575%, with bids ranging from 3.3-3.48%.

Demand for 28-day term deposits stood steady at P30.124 billion, steady from last week’s P29.242 billion to settle higher than the P20-billion offer. This pushed rates lower to 3.4192% compared to 3.4229% a week ago, beating the trend for the shorter tenors.

The TDF stands as the central bank’s main tool in capturing excess funds in the financial system, especially after the regulator trimmed the reserve requirement ratio imposed on universal and commercial banks to 19% of deposits which took effect March 2.

Mr. Guinigundo previously said that liquidity has been returning to banks, which would explain the oversubscription in some tenors. This follows softer demand seen during the last week of March as banks wanted to hold more cash to service clients ahead of the Holy Week break.

For next week, the BSP’s offer will remain unchanged at P110 billion — P50 billion in seven-day deposits, P40 billion in the 14-day instruments and another P20 billion for the 28-day term.