By Melissa Luz T. Lopez
Senior Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) trimmed the volume of term deposits to be offered next week, in response to softer demand ahead of a long weekend.

The BSP will be offering P90 billion worth of term deposits on Wednesday, down from the P110 billion which has been the weekly amount for the past five weeks.

Broken down, the central bank is looking to offer P50 billion worth of seven-day term deposits. However, the auction volume for the 14-day tenor dropped to P30 billion from P40 billion previously.

As much as P10 billion worth of 28-day term deposits will also be up for grabs on Wednesday, down from P20 billion this week.

BSP Governor Nestor A. Espenilla, Jr. said the adjusted volume for the term deposit facility (TDF) is temporary, in anticipation of tepid demand for long-term placements ahead of Holy Week.

“It just reflects our forecast that banks tend to want to hold more cash in anticipation of a long holiday,” Mr. Espenilla told reporters late Wednesday, noting this will go “back to normal after.”

Financial markets will be closed on March 29-30 in observance of Maundy Thursday and Good Friday holidays for the Lenten Season, as observed by Catholics. Trading resumes on April 2.

Demand for the TDF totalled P128.211 billion during this week’s auction, down from the P145.828 billion offers received a week ago but still higher than the P110 billion which the central bank wanted to sell.

Banks crowded the one-week term deposits as demand soared to P72.293 billion on Wednesday, which drove the average yield lower to beat an uptrend seen for the two-week and one-month tenors.

The TDF is the central bank’s primary tool in shoring up excess funds in the financial system, especially after the regulator reduced the reserve requirement ratio imposed on universal and commercial banks to 19% of deposits effective this month.

The decision to reduce auction volumes likewise came ahead of a much-anticipated rate hike in the United States by 25 basis points, following their March 20-21 policy review.

Weekly auction volumes have been raised to P110 billion since Feb. 21 from P80 billion previously, with central bank officials expecting that the additional P30 billion added each week will capture some P90 billion of money supply unleashed from lower bank reserves.

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