Short-term deposit rates rise at auction
Term deposit rates auctioned by the Bangko Sentral ng Pilipinas (BSP) increased yesterday with the seven days significantly higher week-on-week while the 28 days were only slightly changed.
The term deposit facility (TDF) also received lower bids this week of R104 billion compared to last Wednesday’s R139.27 billion. The volume was R150 billion, or R110 billion for the 28 days and R40 billion for the 7 days.
The weighted average rate for 28 days went up to 3.4960 percent from the previous week’s 3.4950 percent. The bid coverage ratio however slid to 0.6105.
The shorter-dated TDF average accepted yield, in the meantime, rose to 3.3765 percent from last week’s 3.3484 percent. Bid coverage ratio showed demand slowed this week to 0.9223.
In Wednesday’s auction, both tenors were undersubscribed. The 7 days had tenders amounting to R36.89 billion which was lower than last week’s R37.829 billion. The 28 days received offers of only R67.155 billion when in the previous week, it attracted R101.44 billion.
The BSP announced yesterday that it will offer the same volume or R150 billion on September 27.
The central bank reduced the offer size of the 28 day term deposit from R140 billion to R110 billion last August and implemented it on September 6.
At the time, BSP Deputy Governor Diwa C. Guinigundo said they decided to cut the TDF volume to refine the auction process. He said the banking sector’s increased loan activities and higher demand for credit contributed to the persistent undersubscriptions.
Guinigundo also said that since introducing the TDF last June 2016, it has adequately mopped up a significant volume of excess liquidity. He said banks are releasing more loans rather than placing excess funds with the central bank and that TDF liquidity is fully absorbed by the market.
The TDF is one of the BSP’s primary liquidity absorption facilities. Other liquidity management tools are the overnight lending and overnight deposit facilities, the reserve requirement, the rediscounting rates and the BSP’s government securities’ holdings.