Yields on term deposits steady
BANKS and trust firms continued to swarm the week-long term deposits offered by the Bangko Sentral ng Pilipinas (BSP) yesterday, which came alongside a marginal rise in yields as market players wanted to place their surplus funds under the facility.
Wednesday’s auction saw a sustained oversubscription for the seven-day tenor, even as the central bank hiked the auction size to P40 billion from P30 billion previously. Total bids hit P65.509 billion, just a tad lower than the P66.502 billion demand seen the previous week.
The average yield also saw a minimal increase to 3.308% as banks sought for returns within 3.2- 3.35%, barely moving from the 3.3068% rate seen during the April 26 auction.
In contrast, offers under the month-long term deposits failed to fill the auction volume even as it was trimmed to P140 billion yesterday. Market players only wanted to lock up P113.974 billion for 28 days under the term deposit facility (TDF), roughly the same amount of bids the central bank accepted the past week.
Banks and trust firms asked for an average 3.4589% rate for the month-long placements, ticking higher from the 3.4471% yield seen a week ago.
The TDF is currently the central bank’s main tool to arrest excess money supply in the financial system by allowing financial firms to place their idle money with the BSP in exchange for a small margin.
BSP Governor Amando M. Tetangco, Jr. said the auction results reflected strong preference for the shorter-dated deposits, as banks bounce back from a spike in demand for cash over the long weekend.
“There continues to be strong demand for the seven-day tenor over the 28- day tenor as banks find the relatively high rate for the seven days attractive. BSP will continue to monitor bank liquidity positions as some reported that there is lower appetite for the 28 days as they are still refining positions after the long weekend,” Mr. Tetangco said in a text message to reporters.
Malacañang announced work suspensions as early as April 27 for government offices in Manila and Pasay City, followed by a Metro Manila-wide non-working day last Friday as the country hosts the Association of Southeast Asian Nations Summit, followed by the May 1 Labor Day commemoration last Monday.
Looking ahead, Mr. Tetango said a recovery in demand for the month-long tenor may be expected, although market players are seen to remain biased towards the week-long term.
“We expect to see continued interest in the 7 days as the 7 day average rate remains close to the 28 day average rate. The subscription for the 28 days may rise as funds come back to the banking system,” the BSP chief said yesterday.
The central bank also decided to keep the auction volume at P180 billion, broken down into P40 billion for the seven- day term and P140 billion for the 28day tenor for the second straight week.