Yields on term deposits mixed

By Melissa Luz T. Lopez, Senior Reporter
YIELDS ON term deposits floated by the Bangko Sentral ng Pilipinas (BSP) saw mixed movements this week, as banks crowded shorter tenors but asked for bigger returns for month-long placements.
Demand reached P124.499 billion for deposits on offer yesterday, well above the P100 billion on the auction block but slightly lower than the P128.839 billion bids received the previous week.
All tenors saw tenders settle above the central bank’s offerings, although the bias remained in favor of the one-week and two-week papers.
Banks wanted to place as much as P47.436 billion as seven-day deposits, higher than the P47.372 billion the previous auction and still higher than the P40 billion on the auction block. This drove rates lower to average 3.7494%, coming from the 3.7586% fetched the previous Wednesday.
On the other hand, the 14-day tenor remained as the instrument of choice among players as bids amounted to P54.352 billion, surpassing the P40-billion offer. This is lower than the P57.485-billion tenders received last week.
This pushed down the average yield to 3.9084% compared to the 3.922% logged a week ago.
Meanwhile, appetite for the 28-day term papers eased to P22.711 billion from P23.982 billion previously, but still logged higher than the P20 billion which the central bank wanted to sell. In turn, the average yield inched up higher to 3.9471% from 3.9416%, as players sought for returns ranging from 3.9-4%.
Since June 2016, the term deposit facility (TDF) has been the central bank’s main tool to arrest excess money supply in the financial system. The BSP holds the weekly auctions to bring market and interbank rates within its desired spread, which currently ranges from 3-4%.
The central bank has been offering P100 billion for its weekly auctions since June.
Market observers, including the International Monetary Fund, have said that the central bank’s use of the TDF has been successful in shoring up excess liquidity following the reduction in the reserve requirement ratio imposed on big banks.
In two moves, the BSP trimmed the reserve level to 18% from 20% previously and unleashed roughly P200 billion in each wave.
BSP Governor Nestor A. Espenilla, Jr. has said that he will cut the reserves to single-digit over the next five years.
The central bank will be offering the same volumes under all tenors of its term deposits next week: P40 billion apiece in the seven-day and 14-day terms and P20 billion in the 28-day deposits.