Yields on term deposits climb

By Melissa Luz T. Lopez, Senior Reporter
TERM DEPOSITS saw a sharp rise in yields yesterday, with stronger demand seen for longer tenors ahead of a fresh cut in bank reserves.
Banks wanted to place as much as P121.077 billion under the term deposit facility (TDF) on Wednesday, recovering from the P98.455 billion tenders received the previous week and surpassing the P110 billion offered by the Bangko Sentral ng Pilipinas (BSP).
Despite the abundant offers, players sought for higher returns which pushed average rates as much as 10 basis points (bp) higher from a week ago.
Bids for the seven-day tenor improved to P48.206 billion coming from P42.589 billion the previous week, but still fell short of the P50 billion which the central bank offered to sell. However, the BSP opted to reject some bids due to steep margins asked by the players, which resulted in just a P48.106-billion award.
The week-long deposits fetched an average 3.693% yield as bids offers ranged from 3.525-3.75%, or 10.6 bps higher than the 3.5866% rate seen a week ago.
In contrast, demand for the 14-day tenor soared to P46.966 billion from P32.155 billion received the previous week and logging above the P40 billion on the auction block. However, rates continued to trend higher to average 3.6683%, up by nine basis points from last week’s yield.
Tenders for the 28-day tenor also improved to P25.905 billion against a P20-billion offering. This picked up from P23.711 billion last week versus the P30 billion dangled by the BSP. In turn, average returns sought by banks stood at 3.6431%, some 7.2 bps higher than 3.5716% fetched previously.
The TDF stands as the central bank’s main tool in capturing excess money supply in the local financial system.
BSP Governor Nestor A. Espenilla, Jr. has said the central bank is poised to raise the weekly volume for succeeding auctions in order to absorb additional liquidity that will be unleashed just as the one percentage point cut in bank reserves kicks in by Friday.
The adjustment, which is the second of its kind this year, will free up at least P90 billion from bank vaults which they can now use for additional lending.
Reducing the reserve standard meant pumping even more funds into the financial system, which comes at a time of double-digit money supply growth sustained over the past two years.