Demand for BSP’s TDF drops ahead of review

APPETITE FOR term deposits declined at this week’s auction ahead of the meeting of the Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board.

The BSP on Thursday said tenders received for its term deposit facility (TDF) reached just P29.644 billion this week, lower than the previous auction’s bids worth P34.327 billion but still filling the P20 billion on offer.

Following the Labor Day holiday, the central bank offered shorter tenors this week, namely six-day and 13-day papers. As with last week’s auction, it also didn’t offer the month-long tenor yesterday.

Demand for the six-day tenor hit P14.126 billion this week, lower than the P15.02 billion worth of tenders seen in the previous offering but still more than the P10 billion in week-long term deposits offered by the central bank on Thursday.

Accepted yields settled between 4.63% and 4.76% yesterday, down slightly from last week’s 4.65%-4.775%. This resulted in an average rate of 4.7198% for the six-day papers, down a tad from the previous auctions 4.7567% average for the seven-day tenor.

The same decline in tenders was seen for the 13-day papers as total bids stood at P15.52 billion yesterday versus the P19.30 billion in tenders received for the 14-day papers last week. Still, this was above the P10 billion worth of 13-day deposits on the auction block.

Returns sought by banks for parking their funds with the BSP ranged from 4.67%-4.78%, also lower than the 4.7%-4.825% margin fetched in the previous week. This led to an average yield of 4.7524%, lower than the previous week’s 4.7789%.

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 central bank is reviewing policy settings anew next Thursday. At its March meeting, the Monetary Board voted to keep key interest rates steady, citing the need to stay cautious despite easing inflation.

Some economists are calling for monetary policy easing, with inflation seen to continue its downtrend on lower rice prices following the implementation of the Rice Tariffication Law.

Analysts also expect a cut in big banks’ reserve requirement ratio this quarter as liquidity growth continues to slow. Domestic liquidity or M3, considered as the broadest measure of money in an economy, grew 4.2% year-on-year to about P11.4 trillion in March, slower than the 7.1% expansion in February and 7.6% growth in January, the central bank reported earlier this week. This pace is also the slowest recorded since September 2012.

For next week’s auction, the central bank is hiking its offering of week-long term deposits to P20 billion but maintained the 14-day tenor offer volume at P10 billion. Meanwhile, it will not offer 28-day deposits. — RJNI