BANKS’ APPETITE for term deposits increased this week to push yields lower as the central bank placed a higher volume on the auction block ahead of its monetary policy review.
The Bangko Sentral ng Pilipinas (BSP) on Wednesday received P38.540 billion in tenders under its term deposit facility (TDF), more than filling the P30 billion up for auction and recovering from the previous week’s demand worth P29.644 billion.
Tenors for the week were back to the usual seven and 14 days following last week’s offering of only six-day and 13-day papers due to a holiday. As with last week’s auction, it also didn’t offer the month-long tenor yesterday.
Demand for the one-week term deposits offer hit P20.53 billion, slightly higher than the P20 billion on the auction block. This week’s bids also outpaced the P14.13 billion in tenders seen last week, although the central bank offered just P10-billion worth of the six-day deposits at the May 2 auction.
Accepted yields settled between 4.55% and 4.76% from the range of 4.63%-4.76% seen last week. This resulted in an average rate of 4.6925% for the seven-day papers, lower than the 4.7198% yield for the six-day term deposits auctioned last week.
Tenders for the two-week papers likewise increased to P18.01 billion yesterday, almost double the P10 billion on offer, from the P15.52 billion in bids seen for the 13-day term deposits last week.
Returns sought by banks for parking their funds with the BSP decreased slightly to 4.6%-4.76% on Wednesday from last week’s 4.67%-4.78%. The average yield on the 14-day tenor settled at 4.6961%, a decline from last week’s 4.7524%.
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. Through the weekly auctions, the BSP wants to bring loan and interbank rates within their desired 4.25-5.25% range.
The central bank is reviewing policy settings anew today. At its March meeting, the Monetary Board voted to keep key interest rates steady, citing the need to stay cautious despite easing inflation.
The Philippine Statistics Authority reported on Tuesday that headline inflation slowed to a 16-month low of 3% in April from 3.3% in March and 4.5% a year ago — causing more analysts to predict a cut in key interest rates by the BSP sooner rather than later.
Following the release of the latest inflation data, BSP Governor Benjamin E. Diokno said on Tuesday that the BSP will keep watch of price risks as its Monetary Board conducts its third policy review for the year on Thursday.
The central bank governor earlier said that the BSP will continue to be data-driven in its decision-making amid mounting expectations of monetary policy easing.