Yields on term deposits mixed
TERM DEPOSITS saw demand slip this week just as the government floated retail Treasury bonds (RTBs) to investors, with yields showing mixed movements across tenors.
Banks put forward P69.995 billion in bids for the term deposit facility (TDF) on Wednesday, lower than the P80.893 billion received last week. Still, the amount settled above the P50 billion which the Bangko Sentral ng Pilipinas (BSP) wanted to sell.
The softer appetite for term deposits came right after the Bureau of the Treasury put up five-year RTBs for sale to the public on Tuesday, where it shored up offers worth P113.772 billion. The state upsized its offer to P120 billion from P30 billion initially, and can accommodate more purchases until March 8.
Bids for the seven-day papers slipped by a tad to P36.759 billion yesterday coming from the P38.116 billion fetched the previous week but still well above the P20 billion which the BSP wanted to sell.
Despite the decline in tenders, yields on these notes also went down to average 5.1027% from 5.1248% the previous week.
The 14-day tenor saw the biggest drop in offers, shoring up just P21.874 billion this week from the P33.589-billion demand posted during the Feb. 20 exercise. However, interest rates stood steady at 5.1661% versus last week’s 5.1659%.
In contrast, the 28-day instruments saw more action versus a week ago. Total bids picked up to P11.362 billion versus P9.188 billion, which went above the P10 billion which the BSP placed on the auction block. This prompted banks to ask for bigger returns at 5.2017%, coming from 5.1822%.
The TDF is the central bank’s primary tool to shore up excess cash in the financial system. Through the weekly auctions, the BSP wants to bring market and interbank rates closer to their desired range through the yields which they accept.
The facility has seen more action over the past few weeks following the Feb. 7 decision of the BSP to keep benchmark rates steady at 4.25-5.25%.
BSP Deputy Governor Diwa C. Guinigundo said the latest auction results prove that the market is not tight, with both the RTBs and the TDF seeing more than sufficient demand.
“It only means we have ample liquidity in the system,” Mr. Guinigundo said about this week’s auction.
The BSP official noted that the $2.704-billion balance of payments surplus posted in January also shows that there are more dollars in the local financial system, boosting domestic liquidity.
Mr. Guinigundo has been dispelling some observations that the market is tight, which has been the basis of some market economists in calling for a fresh cut in required bank reserves.