YIELDS on term deposits moved sideways yesterday, as the Bangko Sentral ng Pilipinas (BSP) trimmed its offering of the month-long tenor due to lower demand.
Bids for Thursday’s term deposit facility (TDF) auction settled at P121.147 billion, failing to reach the P130 billion the BSP wanted to sell, although higher than the P116.555 billion in offers recorded the previous week.
Offers for the six-day tenor fell short of the amount auctioned off by the central bank, totalling just P30.528 billion, lower than the P40 billion the BSP wanted to sell. Yesterday’s total was also a decline from the previous week’s bids worth P40.868 billion.
The undersubscription caused yields to move sideways to post an average of 3.3548%, slightly higher than the 3.3546% quoted last week.
Meanwhile, the 27-day tenor was slightly undersubscribed yesterday after the BSP trimmed the total auction volume to P90 billion starting this week from P100 billion previously. Demand climbed to P90.619 billion from the previous week’s P75.687 billion.
With bids filling the central bank’s offer, the average yield on the month-long term deposits inched up to 3.494% from last week’s 3.4925%.
The TDF is the central bank’s main tool to capture excess money supply in the system by allowing banks to park funds that they cannot deploy for loans in exchange for a small return.
BSP Deputy Governor Diwa C. Guinigundo said the market remains biased towards the shorter-tenored term deposits.
“It’s just that there were more maturities for TDF 28 days given the reduction in the volume of offering,” Mr. Guinigundo said in a text message.
Last week, he said the BSP decided to trim the month-long term offering due to the thinning amount of idle funds in the financial system, since banks opted to deploy their cash for lending, foreign exchange operations and investments.
The market is also expecting a possible interest rate hike by the US Federal Reserve at the end of the year following the favorable economic data, which could push global yields up. – K.A.N. Vidal