Demand for BSP’s term deposits rebounds

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DEMAND for term deposits rebounded following the holidays. — BW FILE PHOTO

By Melissa Luz T. Lopez, Senior Reporter

DEMAND FOR term deposits recovered yesterday across all tenors, showing improved liquidity after some tightness observed during the holiday season.

Banks put forward P73.514 billion in bids for the term deposit facility (TDF) on Wednesday, surging past the P50-billion auction volume and the P46.086 billion received by the Bangko Sentral ng Pilipinas (BSP) last week.

Appetite improved across the board as demand recovered after Christmas, which sees a seasonal spike in demand for cash that leaves banks with a smaller stash of idle funds.

Bids for the seven-day tenor more than doubled this week, reaching P35.34 billion versus the P16.731 billion a week ago. This allowed the central bank to fill its P20-billion offering, and even pulled down the average yield to 5.0706% compared to the 5.0784% fetched previously.

The 14-day deposits also saw more action this week, with banks wanting to place as much as P23.297 billion, settling higher than the P20 billion on the auction block. This improved from the P15.092 billion which players wanted to park under the TDF on Jan. 2.

Despite this, the average yield inched up to 5.153% this week from 5.1319% as banks asked for returns ranging from 5.1-5.2%.

On the other hand, a minimal uptick was seen for the 28-day papers, which saw demand inch up to P14.877 billion versus P14.263 billion the past week. This was more than enough to fill the P10 billion that the BSP offered to sell, which also pulled up the average yield to 5.1694% from 5.1672%.

The TDF stands as the central bank’s primary tool to capture excess money supply in the financial system. Through the weekly auctions, the BSP ushers market and interbank rates closer to its desired range of 4.25-5.25% through the yields which they accept.

The window has seen narrower bids over the past few weeks as banks chose to hold more cash, in response to a seasonal demand from clients for Christmas. Yesterday’s demand is the highest seen since Dec. 12, which saw offers hit P85.065 billion.

For BSP Deputy Governor Diwa C. Guinigundo, this week’s auction shows that liquidity has started to return to normal levels.

“Given the oversubscription across maturities, we believe the exodus back to BSP of banks’ excess funds will continue at least for a couple of weeks more,” Mr. Guinigundo said in a text message to reporters.

“[O]ver the next few weeks, the large oversubscription would continue to soften as funds previously withdrawn from the BSP continue to return to the BSP itself… After the holidays, we should be seeing lower oversubscription as liquidity normalizes.”

The central bank is keeping its offer volume for next week steady at P50 billion — P20 billion apiece for the seven-day and 14-day tenors and P10 billion in the 28-day term deposits.