By Melissa Luz T. Lopez, Senior Reporter
DEMAND SOARED for term deposits this week, pulling yields down across the board as the market remains awash with cash.
Banks wanted to place P80.893 billion under the term deposit facility (TDF) on Wednesday, marking stronger appetite for the placements as the bids rose from last week’s P68.09 billion worth of offers. This also meant that the P50 billion the Bangko Sentral ng Pilipinas (BSP) put up for sale had a bigger market.
Players continued to crowd the one-week papers, with nearly half the total tenders going into the shortest tenor. Despite this, average rates went down across the board.
Bids for the seven-day papers surged to P38.116 billion yesterday from last week’s P28.079 billion to again surpass the P20 billion on the auction block. The strong interest prompted banks to ask for lower returns, fetching an average of 5.1248% versus 5.1565% previously.
The 14-day papers also saw bigger interest, with the total offers reaching P33.589 billion against a P20-billion auction volume. This also climbed from the previous week’s P27.259 billion and pushed yields down to 5.1659% from 5.1828% in the face of greater supply.
Breaking the trend were the bets received for the 28-day instruments, which slid to P9.188 billion versus the P12.752 billion shored up the past week, causing the P10-billion offer to be undersubscribed. Still, the accepted yield stood barely changed at a 5.1822% average compared to the 5.1839% seen on Feb. 13.
The TDF is the central bank’s main tool to capture excess funds in the financial system. Through the weekly auctions, the BSP wants to bring market and interbank rates closer to its desired range through the yields which they accept.
Banks have been scrambling to park more funds under the facility after the central bank decided to keep benchmark interest rates steady during their Feb. 7 meeting, amid signs that inflation is on its way down and will return to the 2-4% target this year.
Any adjustments to the benchmark borrowing rates — which currently stand between 4.25-5.25% — will also affect acceptable yields under the TDF, as yields are based on the key rates set by the BSP.
BSP Deputy Governor Diwa C. Guinigundo has dispelled commentaries about tight domestic liquidity conditions, saying the oversubscription in the weekly term deposit auctions prove otherwise.
“Banks continue to be more liquid. Remember January BoP (balance of payments) was in surplus and that means, there is actual additional inflow of liquidity in the system,” Mr. Guinigundo said in a text message to reporters.
“That’s the reason why there were oversubscriptions across all tenors with interest rates showing some decline. All consistent with a liquid system.”
Some market analysts have been noting that the BSP may soon touch the reserve requirement ratio (RRR) imposed on universal and commercial banks, saying that this would unleash billions of additional cash which can fund more loans.
However, the central bank official said they need to see inflation return to target, price expectations to be subdued, and real “tightness” in the financial system before a fresh RRR cut can be unleashed.

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