RATES for the central bank’s term deposit auction posted mixed movements yesterday, with the week-long yield hitting a two-month high while the month-long tenor dropped anew amid ample money supply in the system.

Total demand for the term deposits on offer reached P160.647 billion, slipping from the P187.62 billion bids tallied a week ago and settling below the P180 billion which the Bangko Sentral ng Pilipinas (BSP) wanted to auction off.

The average yield under the seven-day tenor surged to 3.2189% from 3.1648% the previous week, the highest since the 3.2468% rate seen during the May 17 auction.

This came as banks wanted to place P44.378 billion with the central bank for a week-long term, slightly higher than the P40-billion auction size.

Banks asked for returns ranging from 3.05-3.3%, which in turn drove the average rate higher even as the BSP was able to award the entire P40-billion volume.

On the other hand, the 28-day term deposits remained undersubscribed as offers totalled P116.269 billion, lower than the past week’s P137.59 billion and settling below the P140-billion volume set by the BSP.

The average rate, however, fell to 3.4892% from 3.4909%, sustaining a two-week decline.

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

Through the window, the central bank is looking to bring market rates closer to its 3% benchmark rate, while also prodding increased interbank lending to augment liquidity positions.

Only banks are now able to participate in the weekly central bank auctions as the one-year leeway given to trust firms expired last June 30.

BSP Governor Nestor A. Espenilla, Jr. has said that TDF settings are under constant review, while noting that the central bank’s decisions will remain “data-driven.”

For next week, the BSP has kept the auction amount steady at P180 billion, split into P40 billion for the week-long term and P140 billion for the month-long deposits.

Analysts have said that the BSP will likely keep the TDF volumes steady for the meantime and hold off the planned adjustments to the 20% reserve requirement imposed on big banks as the domestic financial market remains awash with cash. — Melissa Luz T. Lopez

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