peso remittance
YIELDS for the central bank’s term deposit facility fell despite softer demand. — PHILSTAR/KRIZ JOHN ROSALES

By Melissa Luz T. Lopez, Senior Reporter

YIELDS FETCHED for term deposits continued to fall this week, even as demand softened ahead of next week’s holiday break.

Total bids reached P50.321 billion on Wednesday, slipping from the P63.033 billion in tenders received a week ago but was still more than enough to raise the P30 billion which the Bangko Sentral ng Pilipinas (BSP) placed on the auction block.

Appetite for both the one-week and two-week tenors softened compared to the April 3 exercise, but continued to clock in much higher than the amount the central bank wanted to sell.

This comes days ahead of the April 15 annual tax filing deadline and the long weekend break in observance of Holy Week among Catholics. Financial markets will be closed on April 18-19, forcing banks to service more withdrawal transactions during the period.

The seven-day papers received P29.696 billion in total tenders, filling the P20-billion auction volume although lower than the P40.46 billion in offers received a week ago.

Despite the weaker demand, banks still asked for lower returns under the term deposit facility (TDF), with accepted yields ranging at a lower 4.85-4.97% spread. This led to an average rate of 4.8943%, much lower than the 4.9333% fetched previously.

The same trend was observed for the 14-day term notes. Bids totalled P20.625 billion yesterday, slightly lower than the P22.573 billion put forward last week but still double the P10 billion which the BSP offered to sell.

Returns sought by banks also slid to between 4.8% and 4.95%, which led to an average yield of 4.9148% versus 4.9969% during last week’s auction.

The TDF stands as the central bank’s primary tool to shore up excess funds in the financial system and to better guide market interest rates. Through the weekly auctions, the BSP wants to bring loan and interbank rates within their desired 4.25-5.25% range.

The Monetary Board led by new BSP Governor Benjamin E. Diokno voted to keep key interest rates at the 4.25-5.25% range last month, keeping the range for TDF yields steady. Policy makers said they still need to confirm if inflation is indeed on its way down, even if the decline has been sustained as of March.

The lower TDF rates also reflect the movement of yields on Treasury bills. National Treasurer Rosalia V. De Leon said interest rates for short-term debt papers are dropping amid expectations of easing inflation, with demand now shifting in favor of long-term instruments amid uncertainty in the global financial markets.

Meanwhile, the BSP has not yet resumed in offering the 28-day deposits for the third straight week.

BSP Deputy Governor Diwa C. Guinigundo maintained that there remains ample liquidity in the local financial system despite the lower TDF bids.

“Oversubscription and easing interest rates suggest that we continue to see the return of more liquidity into the system as the government withdraws from its deposit with the BSP to fund budgetary expenses and the recipient of funds depositing them back to the banks. That leaves more funds available to place with the BSP,” Mr. Guinigundo told reporters in a text message when sought for comment.

The BSP official has repeatedly stressed that any perceived tightness in money supply is “temporary,” as financial firms continue to sit on piles of cash largely from deposits.