Gov’t downsizes term deposits, offers more retail T-bonds

The Bangko Sentral ng Pilipinas (BSP) reduced the volume of term deposit offering for next week as the national government continues to offer three-year retail treasury bonds (RTBs) to investors.

The central bank’s auction committee will lower the volume of the term deposit auction facility on June 6 to P100 billion from P110 billion. It is reducing the issue size of the seven-day term deposits to P40 billion, but will retain the issue size of the 14 and 28 days at P40 billion and P20 billion, respectively.

Last Wednesday, the Bureau of Treasury (BTr) launched the sale of threeyear RTBs due 2021.

It initially raised P66 billion, more than double the initial offer size of P30 billion, following the settlement of P130 billion in maturities last week. Total tenders amounted to P92.8 billion.

The national government raised P181 billion and P255.4 billion, respectively from the issuance of three and five-year RTBs in March and November last year.

BSP Deputy Governor Diwa Guinigundo attributed the undersubscription of the seven-day term deposits “to month-end requirements as well as initial preparations for Guinigundo the three-year RTBs.”

“This is consistent with previous observation that banks seem to use the funds that they have allocated for the sevenday TDF for their liquidity management,” he said

As a result, banks demanded higher rates across the three TDF tenors last May 30.

“Banks demanded higher rates due to alternative RTB issue coming up in days,” Guinigundo said.

Last Wednesday, the yield of the seven-day term deposits rose to 3.693 percent from 3.5866 percent last week, while the 14-day tenor fetched a higher rate of 3.6683 percent from 3.5783 percent.

Likewise, the rate of the 28-day term deposits also rose to 3.6431 percent from 3.5716 percent.