By Melissa Luz T. Lopez, Senior Reporter
BIDS FOR term deposits plunged this week, as banks chose to hold more cash ahead of the holidays.
Demand for term deposits softened to P58.488 billion on Wednesday, dropping from the P85.065 billion fetched last week and settling below the P70 billion which the Bangko Sentral ng Pilipinas (BSP) put up for auction.
The short-term placements were met by weak appetite across all tenors, which came a week ahead of a series of holidays running up to Christmas.
The seven-day tenor saw tenders slide to P37.235 billion, down from P52.171 billion fetched during the previous offering to fall short of the P40-billion auction amount.
Lenders who submitted bids for these papers wanted bigger returns for parking their extra cash here, with yields ranging from 5-5.25% to average 5.1462%. This rate picked up from the 5.1135% fetched a week ago.
The same trend was observed for the 14-day placements, as bids also slipped to P14.623 billion from the P21.184 billion received a week ago. Banks also failed to fill the P20-billion auction amount, which drove yields higher to 5.2188% from 5.1649% last week.
Offers for the 28-day deposits were likewise halved to P6.63 billion versus P11.71 billion received a week ago, to settle below the P10 billion which the central bank wanted to sell. Banks also sought for bigger margins for these placements, with the average climbing to 5.2092% from 5.1952% previously.
The central bank has been relying on the term deposit facility (TDF) as its main tool to capture excess liquidity. By hosting these weekly auctions, the BSP is looking to tow market and interbank rates closer to its desired range by setting the standard for short-term instruments through the yields which they accept.
TDF rates have consistently risen since mid-November after the BSP raised benchmark yields by another 25 basis points. This marked the fifth straight hike from the Monetary Board this year, before policy makers decided to take a breather and keep rates steady during last week’s rate-setting meeting.
Currently, benchmark rates range between 4.25-5.25%, which also serves as the ceiling for TDF transactions.
BSP Deputy Governor Diwa C. Guinigundo previously pointed out that banks may be limiting their TDF placements as they choose to hold more cash to service bigger client withdrawals, as demand usually surges during the holiday season.
Financial markets will be closed from Saturday until Tuesday in observance of Christmas, to be followed by another long weekend for the New Year.
Next Wednesday, the BSP will offer P50 billion in term deposits — P30 billion for the seven-day term and P10 billion apiece in the 14-day and 28-day tenors.

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