By Melissa Luz T. Lopez, Senior Reporter
TERM DEPOSITS offered by the Bangko Sentral ng Pilipinas (BSP) continued to receive strong demand this week, keeping yields steady amid strong appetite across all tenors.
Banks pledged as much as P128.839 billion for papers on offer yesterday, well above the P100 billion placed on the auction block and roughly matching the P129.006 billion in tenders received a week ago.
All three tenors continued to be oversubscribed, although the two-week deposits attracted the biggest amount of bids this week.
Seven-day term deposits shored up P47.372 billion in total tenders, lower than the P49.382 billion received during the July 11 auction but still higher than the P40 billion offered by the central bank. As a result, fetched rates moved sideways to average 3.7586% from 3.7537% previously.
In contrast, demand soared for the 14-day tenor to reach P57.485 billion, jumping from the P51.39 billion offers posted last week and settling above the P40 billion which the BSP wanted to sell. The surge in bids even drove the average yield lower to 3.922%, coming from the 3.9258% fetched last week.
Tenders for the 28-day deposits declined to P23.982 billion, lower from the past week’s P28.234 billion but still above the P20 billion placed on the auction block. This pushed yields slightly higher to 3.9416%.
The term deposit facility (TDF) stands as the central bank’s main tool to capture excess money supply in the financial system. The BSP actively adjusts auction amounts each week in order to bring market and interbank rates within its desired spread, which currently ranges from 3-4%.
Some market analysts have pointed out that the BSP is behind the curve as it kept interest rates low for far too long, with inflation currently soaring at fresh highs and likely to keep rising over the next few months.
For his part, BSP Governor Nestor A. Espenilla, Jr. said the central bank continues to have “firm monetary control” over domestic conditions, saying that their back-to-back rate hikes remain “timely and appropriate” in the context of rising price pressures.
Prior to the May and June rate increases, the BSP chief said their initial response to elevated inflation was made through the TDF.
“[R]ecognizing increasing volatilities in world oil prices and global interest rates, the BSP responded to changing monetary environment conditions by adjusting auction volumes and allowing the term deposit facility rates to rise, creating effective tightening in the market,” Mr. Espenilla said in a speech delivered on Tuesday.
The governor admitted that their initial estimates suggested no need for policy tweaks early this year, but “material changes” observed going into the second quarter prompted a stronger response from the monetary authority.