• 7-day term deposit rate eases anew

The yield of seven-day term deposits eased for the sixth straight week, falling below three percent since June as banks continued to swarm the weekly term deposit auction facility (TDF).

The short-dated term deposits fetched a lower yield of 2.9256 percent yesterday, lower than last week’s 3.028 percent as accepted yield ranged from 2.75 to 2.989 percent.

This was the first time in seven months the yield of the seven-day term deposits fell below three percent. It fetched 2.9904 percent last June 21.

Tenders reached P119.58 billion yesterday, almost three times the issue size of P40 billion.

The auction committee of the Bangko Sentral ng Pilipinas (BSP) temporarily stopped the auction of 28-day term deposits since Dec. 20 due to tight market conditions after the Bureau of Treasury raised P255 billion from the issuance of retail treasury bonds as banks needed more cash for the Christmas holidays.

The BSP will again offer only P40 billion worth of seven-day term deposits in the next auction scheduled on Jan 31.

BSP Deputy Governor Diwa Guinigundo earlier said banks are now awash with cash as significant liquidity continued to come back after the Christmas holidays.

He also cited the continued disbursement by the government to fund its normal current operations as well as capital spending especially for infrastructure projects.

Furthermore, he added there is sustained high demand for loans, foreign exchange for imports, outward investments, and debt amortization.

“We are therefore witnessing the gradual normalization of liquidity conditions. The BSP does not want to interfere with this process by bringing back liquidity into its deposit facilities at this transition stage,” he said.

According to Guinigundo, timing is essential on the planned return of the 28-day term deposits in the weekly TDF.

The central bank has reduced the volume of the TDF five times since it was launched in June 2016 as part of the shift to the interest rate corridor (IRC) framework.