By Melissa Luz T. Lopez, Senior Reporter
YIELDS ON term deposits fell across the board this week, supported by stronger demand as banks appear to remain awash with cash.
Bids for the term deposit facility (TDF) soared to P95.029 billion yesterday, soaring from the P69.995 billion in offers received a week ago and nearly double the P50 billion which the Bangko Sentral ng Pilipinas (BSP) looked to sell.
The recovery in demand came the week after the Bureau of the Treasury rolled out its public offering of five-year retail bonds, which shored up P173 billion as of March 1.
Liquidity returned to the TDF on Wednesday, which in turn had banks asking for lower returns amid abundant supply.
The seven-day tenor saw tenders rise to P42.285 billion, improving from the P36.759 billion received last week and logging more than double the P20 billion which the central bank wanted to offer.
To compete with the overwhelming demand, banks pared down the returns they wanted to average 5.0342%, coming from a range of 4.88-5.1% from 5.1027% last week.
The same trend was observed for the 14-day papers, with demand soaring to P33.516 billion from P21.874 billion to also beat the P20-billion auction volume. As a result, yields also dipped to a 5.1452% average from 5.1661% a week ago.
The 28-day instruments also received stronger appetite, with the P10-billion offering met by bids worth P19.228 billion. This rose from the P11.362 billion tenders during the Feb. 27 exercise. Yields also slipped to 5.1758% from 5.2017% previously.
The TDF has been the central bank’s primary tool to shore up excess cash in the financial system.
Through the weekly auctions, the BSP wants to bring market and interbank rates closer to their desired range through the yields which they accept.
Banks had been betting more placements under the TDF since the Monetary Board voted to keep interest rates at the 4.25-5.25% range during the Feb. 7 meeting, which in turn sets the benchmark for term deposit rates.
BSP Deputy Governor Diwa C. Guinigundo has said that recent auction results show the market is not tight, as the TDF continues to receive ample bids even with an ongoing retail Treasury bond offering.
“This situation continues to suggest that the system remains liquid, that banks have increasing surplus funds they can place with the BSP’s facilities, including the TDF,” Mr. Guinigundo said via text message.
Some market players have been calling for fresh cuts in the 18% bank reserve requirement, but the central bank official said they need to see real tightness in liquidity before they do so.