DEMAND for term deposits increased on Thursday after the first round of cuts to lenders’ reserve requirement ratios (RRR), but was still not enough to fill the amount placed on the auction block.

Tenders for the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) auction yesterday totalled P31.614 billion, well below the P40 billion on offer. However, this was higher than the P29.155 billion in bids seen last week.

Bids for the seven-day papers on offer yesterday stood at P18.895 billion, failing to fill the P20 billion on the auction block but still climbing from the P14.98 billion in tenders received for the eight-day tenor a week ago.

Accepted yields ranged between 4.5% and 4.7718%, slightly above the 4.5-4.7679% margin seen the previous week. This caused the average rate of the eight-day deposits to increase to 4.6669% yesterday from 4.6187%.

Meanwhile, total tenders for the 13-day papers amounted to P6.665 billion, a tad higher than the P6.11 billion in bids last week for the 15-day tenor but also below the P10 billion up for grabs yesterday.

Banks asked for returns within 4.5%-4.75%, the same range as last week. The average yield on the 13-day term deposits likewise increased to 4.6048% on Thursday from the previous week’s 4.591%.

On the other hand, the 27-day papers were met with bids totalling P6.054 billion, down from the P8.065 billion logged a week ago and less than the P10 billion offered by the BSP.

Yields sought by banks ranged between 4.595% and 4.9%, slightly above the 4.5-4.75% margin last week. As a result, the average rate of the one-month papers inched higher to 4.6602% from 4.5974% the previous week.

The term deposit tenors offered yesterday were adjusted due the June 12 holiday.

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.

Last month, the BSP cut benchmark interest rates by 25 basis points (bp), bringing the interest rate on the central bank’s overnight reverse repurchase facility to 4.5%. The rates on the overnight lending and deposit facilities were also reduced accordingly to 5% and 4%, respectively.

The BSP also slashed the 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, this month and in July.

BSP Governor Benjamin E. Diokno has said he wants to reduce big banks’ RRR to a single digit rate to put the rate at par with those being implemented in neighboring countries.

BSP Deputy Governor Diwa C. Guinigundo said following the release of inflation data on Wednesday that the pace of further reductions to the RRR “will be governed by both data and evidence.”

“So BSP will continue to monitor key developments and indicators to guide the next steps moving forward,” Mr. Guinigundo said. — Reicelene Joy N. Ignacio