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Demand for BSP’s term deposits drops ahead of reserve ratio cut

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BSP

BANKS’ DEMAND for term deposits declined on Wednesday amid a higher offer volume from the Bangko Sentral ng Pilipinas (BSP) and ahead of the final phase of cuts to lenders’ reserve ratios.

The central bank received P66.231 billion in tenders for its term deposit facility (TDF) yesterday, below the P80 billion it placed on the auction block and the P88.91 billion recorded a week ago.

Broken down, bids for the seven-day papers totalled P27.755 billion, less than the P30 billion up for auction and the P37.495 billion in tenders seen a week ago.

Banks asked for yields from 4.5% to 4.603%, a slightly wider range versus the 4.51%-4.5944% margin seen the previous week. The average rate settled at 4.5679%, a tad higher than last week’s 4.564%.

Meanwhile, the 14-day papers received P16.776 billion in tenders, filling just over half of the P30 billion on the auction block. This is also significantly less than the P30.89 billion in bids logged last week.

Accepted yields settled between 4.5% and 4.7%, also wider than the 4.55%-4.675% range sought in the previous week and causing the average rate to increase to 4.6277% from last week’s 4.6148%.




Bids for the 29-day term deposits, on the other hand, reached P21.7 billion, filling the P20 billion on the auction block. This is also higher than the P20.525 billion in offers seen a week ago.

Returns sought by lenders ranged between 4.5% and 4.75%, steady from last week’s margin. Still, the average yield inched up to 4.6495% from the 4.6492% 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 market expects the BSP’s Monetary Board (MB) to slash interest rates when it reviews policy anew on Aug. 8.

At its June meeting, the MB 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 Governor Benjamin E. Diokno earlier said the regulator may cut policy rates in the second half before moving to reduce banks’ reserve requirement ratio (RRR).

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 last 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.

Last week, Mr. Diokno also said that a possible 25- or 50-basis-point rate cut from the US Federal Reserve gives the BSP “and the entire world more policy space for cutting.” — Karl Angelo N. Vidal

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