DEMAND for the Bangko Sentral ng Pilipinas’ (BSP) term deposits declined on Wednesday ahead of the implementation of the second round of cuts to banks’ reserve requirements.
The central bank received P31.407 billion in tenders for its term deposit facility (TDF) yesterday, above the P20 billion on offer but lower than the P40.787 billion worth of bids seen a week ago.
Broken down, the seven-day papers attracted P14.41 billion in tenders, which led to a full award of the P10 billion placed on the auction block. This is however below the P20.259 billion in bids received a week ago.
Banks sought yields ranging between 4.58% and 4.65% for the one-week term deposits, narrower than the 4.5-4.7% margin seen a week ago. This caused the average yield for the papers to decline to 4.624% from the previous week’s 4.6278%.
Meanwhile, demand for the 14-day term deposits totalled P16.997 billion, well above the P10 billion on offer. However, this declined from the previous week’s P20.585 billion.
Accepted yields settled within 4.65-4.75%, also narrowing from the previous week’s 4.6-4.8% range. This caused the average rate of the two-week papers to decline to 4.7002% from last week’s 4.7107%.
The BSP did not offer one-month term deposits again this week.
The TDF stands as the central bank’s primary tool to shore up excess funds in the financial system and to better guide market interest rates.
The BSP’s Monetary Board, at its meeting last week, kept rates unchanged on expectations of steady inflation and economic growth, and as it monitors the impact of recent monetary adjustments.
The central bank left the interest rate on the BSP’s overnight reverse repurchase facility untouched at 4.5%. The interest rates on the overnight lending and deposit facilities were likewise held steady at five percent and four percent, respectively.
At its meeting last May 9, the MB cut key rates by 25 basis points. The BSP also reduced the reserve requirement ratios (RRR) of lenders by a percentage point effective May 31 to 17% for universal and commercial banks, 7% for thrift banks, and 4% for rural and cooperative banks.
The reserve ratios of big banks and thrift lenders will be reduced further to settle at 16% and 6%, respectively, via 50-basis-point cuts on June 28 and July 29.
BSP Deputy Governor Diwa G. Guinigundo said last week that these RRR reductions are expected to unleash a total of P200 billion into the financial system once the phased implementation is completed. — RJNI