By Melissa Luz T. Lopez
BANKS CROWDED the one-week term deposits offered by the Bangko Sentral ng Pilipinas (BSP) yesterday as market players preferred the short-termed instruments ahead of policy decisions by key central banks.
Demand for the term deposit facility (TDF) totalled P128.211 billion during Wednesday’s auction, lower than the P145.828 billion in offers received the previous week but still above the P110 billion the central bank wanted to sell.
More than half of the bids went to the seven-day tenor to reach P72.293 billion. This picked up from the P70.838 billion tenders seen last week but still higher then P50 billion placed on the auction block.
As a result, yields for the week-long deposits slipped to 3.1768% from 3.1893% previously, as banks asked for lower returns ranging from 3.125-3.2%.
On the other hand, demand for the two-week and one-month tenors waned.
The 14-day term deposits received P35.955 billion worth of bids, down from P52.255 billion a week ago and lower than the P40-billion offering. The average yield then rose to 3.2451% from 3.2404%.
Bids for the 28-day tenor also saw tempered demand at P19.963 billion, settling a tad below the P20-billion auction size. It likewise dropped from the P22.735 billion tenders posted during the March 14 exercise, pushing yields up to 3.3416% from 3.3274%.
The TDF serves as the central bank’s main tool in shoring up excess funds in the financial system, especially after the regulator introduced a reduction in the reserve requirement ratio (RRR) imposed on universal and commercial banks which took effect this month.
Banks crowded the one-week term deposits, reflecting a wider trend among market players as they tackle volatility ahead of an interest rate decision in the United States.
Local shares sunk to the 8,000 level earlier this week as investors anticipate the outcome of the US Federal Reserve’s policy meeting. Yields on 10-year Treasury bonds offered on Tuesday also surged as players expect the Fed to raise rates by 25 basis points.
Back home, the BSP is expected to keep rates steady on Thursday. Several analysts, however, said that raising benchmark rates is necessary in order to contain rising inflation and keep loan rates competitive.
Weekly auction volumes rose to P110 billion since Feb. 21 from P80 billion previously, with central bank officials expecting that the additional P30 billion added each week will capture some P90 billion money supply unleashed from lower bank reserves.