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Demand for term deposits soars

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By Melissa Luz T. Lopez, Senior Reporter

DEMAND SOARED for term deposits offered by the central bank this week, accompanied by a surge in yields to hover close to four percent.

Banks wanted to park as much as P125.157 billion under the term deposit facility (TDF) yesterday, well above the P100 billion which the Bangko Sentral ng Pilipinas (BSP) put up for auction. The amount jumped from the P92.636-billion bids received a week ago.

Tenders increased across all tenors to recover from undersubscription seen the previous weeks, although appetite remained stronger for the week-long papers.

The seven-day deposits saw P58.556 billion tenders, besting the P45.831 billion received a week ago and surpassing the P40 billion offered by the central bank.

Rates sought by players stood at a narrow 3.7-3.8% range to average 3.7779%, a modest increase compared to the 3.7523% fetched during the June 27 exercise.

Bids for the 14-day tenor recovered on Wednesday to end three straight weeks of logging below offer. Banks came forward with tenders worth P44.335 billion, recovering from P31.99 billion the past week and settling higher than the P40 billion on the auction block.

However, the average yield climbed to 3.9309%, up 6.2 basis points (bp) from the 3.8689% logged a week ago to hover close to the 4% ceiling rate set by the central bank.

Demand also improved to reach P22.266 billion, improving from last week’s P14.815 billion to surpass the P20 billion which the BSP wanted to raise. Market players also asked for bigger returns to average 3.9442%, rising by 9.7 bp week-on-week as margins ranged from 3.8-4%.

The TDF is the central bank’s primary tool to capture excess money supply in the financial system.

The BSP actively adjusts auction amounts each week in order to bring market and interbank rates within its desired spread, which currently ranges from 3-4% following a 25bp rate hike in last month.

The Monetary Board introduced a back-to-back increase in benchmark rates during their May and June policy meetings in a bid to rein in future inflation, as price increases have been trending higher than their 2-4% target over the past few months.

Appetite for TDF placements have since recovered. Previously, central bank officials said banks were hesitant to keep their funds locked in for longer periods amid uncertainties in the domestic and global financial markets.

The central bank will offer P100 billion in term deposits again next week, with offer volumes per tenor steady from this week.