By Melissa Luz T. Lopez, Senior Reporter
APPETITE FOR term deposits waned yesterday, driving yields up across the board ahead of the central bank’s rate-setting meeting next Thursday.
Banks wanted to place just P42.805 billion under the term deposit facility (TDF) on Wednesday, sliding from the P60.829 billion worth of bids received a week ago and failing to fill the P50 billion which the Bangko Sentral ng Pilipinas (BSP) offered to sell.
Demand dropped for both the one and two-week tenors as investors grew more upbeat about the month-long papers in exchange for higher returns.
The seven-day instruments saw little action this week as tenders shored up only P11.576 billion, roughly a third of the P30.155 billion in offers received previously and settling well below the P20 billion on the auction block.
Amid the lukewarm reception, banks asked for wider margins averaging 5.0654%, inching up from the 5.0447% fetched during the Jan. 23 exercise.
Players were also less enthused about the 14-day papers, with total bids at P18.806 billion versus P20.163 billion a week ago, which also did not fill the BSP’s P20-billion offer. The undersubscription also pushed yields higher to 5.177% compared to the 5.1437% average posted last week.
On the other hand, demand for the 28-day tenor improved as banks volunteered to place as much as P12.423 billion, higher than the P10.511 billion last week. This broke the trend as the bids surpassed the P10 billion which the BSP placed on offer.
Still, players asked for higher yields averaging 5.1779%, coming from the 5.1547% fetched previously.
The TDF is currently the central bank’s main tool to capture excess funds in the financial system.
Through the weekly auctions, the BSP looks to bring market and interbank rates closer to its desired range of 4.25-5.25% through the yields which they accept.
BSP Deputy Governor Diwa C. Guinigundo has said that there remains “ample” liquidity in the system despite an observed drop in TDF bids, noting that the idle funds held by banks may have instead went to the weekly fund-raising initiatives of the Bureau of Treasury through its offering of debt notes and a tap facility.
On Thursday, the BSP’s Monetary Board will decide on key interest rates for the first time this year. Deputy Governor Maria Almasara Cyd Tuaño-Amador said on Tuesday hinted that policy makers have room to keep rates steady with inflation now decelerating.
Adjustments to the benchmark borrowing rates will also affect acceptable yields under the TDF.