BANKS’ DEMAND for term deposits increased further on Wednesday as the Bangko Sentral ng Pilipinas (BSP) offered a higher volume to investors.
The BSP received P88.91 billion in tenders for its term deposit facility (TDF) yesterday, well above the P80 billion placed on the auction block and higher than the P83.825 billion received a week ago for the central bank’s P60-billion offer.
Yesterday’s P80-billion auction volume is the highest amount the BSP has offered under its term deposit facility this year.
Broken down, bids for the seven-day papers totalled P37.495 billion, above the P30 billion up for auction and more than the P27.82 billion in tenders seen a week ago for the P20-billion offer.
Banks asked for yields from 4.51% to 4.5944%, a slightly narrower range versus the 4.5-4.6% margin seen the previous week. The average rate settled at 4.564%, higher than last week’s 4.5466%.
Meanwhile, the 14-day papers received P30.89 billion in tenders versus the P30 billion placed on the auction block. This is also more than the P33.365 billion in bids logged for the P20 billion on offer last week.
Accepted yields settled between 4.55% and 4.675%, higher than the 4.5-4.6588% range sought in the previous week and causing the average rate to increase to 4.6148% from last week’s 4.5931%.
Bids for the 28-day term deposits, on the other hand, reached P20.525 billion, filling the P20 billion on the auction block. However, this is lower than the P22.64 billion in offers seen a week ago versus the P20-billion auction volume.
Returns sought by lenders ranged between 4.5% and 4.75%, steady from last week’s margin. Still, the average yield inched up to 4.6492% from the 4.6407% in the previous 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 last month 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.
BSP Deputy Governor Francisco G. Dakila, Jr. attributed the recent increase in TDF demand and offer volume to “increased system liquidity coming from the reduction in reserve requirement ratios (RRR) and higher disbursement by the national government.”
After a 100-basis-point (bp) RRR cut across all banks on May 31, the BSP trimmed the reserve ratios of universal and commercial lenders and thrift banks by another 50 bps on June 28 to 16.5% and 6.5%, respectively.
Another 50-bp reduction will be implemented on July 26 to finally bring the RRR of big banks to 16% and thrift banks to 6%, which completes the phased cuts the BSP announced in May. — R.J.N. Ignacio