Yields on term deposits drop amid low tenders

YIELDS on the central bank’s term deposits went down despite a continued undersubscription, with firms preferring to park their excess funds in the month-long tenor.

Total tenders received under the term deposit facility ( TDF) yesterday totalled P107.375 billion, up from the P104.045 billion in bids seen last week.

Still, the central bank’s TDF offers remained undersubscribed as tenders were below the total P150 billion placed by the Bangko Sentral ng Pilipinas (BSP) on the auction block.

Demand for the 28-day term deposits grew to P79.59 billion, up from the P67.155 billion seen last week but way below the P110 billion up for bidding.

Despite higher tenders, the weighted average accepted yield slipped to 3.4907% from the 3.496% seen in the previous offer. The central bank accepted yields from 3.449% to 3.5%.

Meanwhile, bids for the sevenday papers slid to P27.785 billion from the P36.89 billion in tenders seen in the previous week and settling below the P40-billion offer of the central bank.

Accepted yields for the shortertenored papers averaged at 3.3678%, a tad lower from the 3.3765% recorded previously. Rates ranged from 3.3% to 3.4%.

The TDF is the central bank’s primary tool to capture excess money supply in the financial system by allowing banks to park their excess funds with the BSP — or those which are not used for loans or set aside as reserves — in exchange for a small return.

Only banks can participate in the weekly auctions, as the window given to trust firms to participate expired last June 30. Firms can ask for rates ranging from 2.5-3.5%, according to BSP rules introduced in June 2016.

Next week, the BSP will sell thinner term deposits at a total of P140 billion, offering P40 billion under the seven- day tenor and P100 billion in 28-day papers.

The central bank is studying possible tweaks to its term deposit facility auctions which may include the introduction of new tenors, with the adjustments eyed to be finalized within the year.

BSP Deputy Governor Diwa C. Guinigundo earlier said the central bank is in discussions with the industry for new tenors, with the regulator also considering appetite for offers with the Treasury also conducting regular auctions. •