Yields on term deposits decline further
YIELDS ON term deposits fell further this week as investors returned to the market after the holiday break.
Total tenders reached P34.327 billion on Wednesday, more than enough to fill the P20-billion on offer under the term deposit facility (TDF) yesterday. The total was slightly higher than last week’s P30.15-billion total — although only one-week tenors were on offer then. Meanwhile, total bids fell from the P50.321 billion seen at the April 10 auction, which was the last time the Bangko Sentral ng Pilipinas (BSP) offered both the one-week and two-week tenors.
Appetite for both the eight-day and 14-day tenors softened compared to the last time they were awarded, but was still enough to fill the amounts on offer.
The eight-day papers attracted P15.024 billion in tenders on Wednesday, just half of the P30.15 billion in bids received a week ago but still above the P10 billion up for sale.
Banks asked for slightly lower returns, with accepted yields ranging between 4.65% and 4.775%, lower than the previous week’s 4.75%-4.8% spread. This caused the average rate for the deposits to drop to 4.7567% from the 4.7764% fetched last week.
The same trend was seen for the 14-day term deposits on offer. Bids for the tenor totalled P19.303 billion, just a tad lower than the P20.625 billion in tenders received on April 10, when it was last offered and awarded. This was also almost double the P10 billion the central bank put on the auction block.
Returns sought by banks slid to a 4.7%-4.825% spread from the previous offer’s 4.8% to 4.95%. This resulted in an average yield of 4.7789%, lower than the 4.9148% quoted at the April 10 exercise.
The BSP did not offer 14-day and 28-day term deposits last week ahead of the Holy Week break. It hasn’t offered the one-month papers since March 20.
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.
