BANKS’ DEMAND for term deposits rose on Wednesday as the Bangko Sentral ng Pilipinas (BSP) doubled the amount on offer.

The BSP received P83.825 billion in tenders for its term deposit facility (TDF) yesterday, well above the P60 billion placed on the auction block. This is also higher than the P67.548 billion worth of bids received last week for a P30-billion offer.

Broken down, bids for the seven-day papers totalled P27.82 billion, above the P20 billion for auction and more than the P25.42 billion in tenders last week versus the BSP’s P10-billion offer.

Banks sought yields amounting to 4.5-4.6% for the one-week term deposits, the same margin seen in the previous week. Still, the average yield settled at 4.5466%, lower than last week’s 4.5537%.

Meanwhile, the 14-day papers received P33.365 billion in tenders versus the P20 billion placed on the auction block. This is also more than the P22.095-billion bids received last week for the P10 billion on offer.

Accepted yields settled between 4.5% and 4.6588%, narrower than the 4.5-4.6999% margin seen a week ago for the two-week term deposits. This resulted in a decline in the average rate to 4.5931% from 4.6129%.

The 28-day term deposits, on the other hand, received P22.64 billion in tenders, also more than the P20 billion up for grabs and last week’s bids worth P20.033 billion against the P10-billion volume auctioned off.

Returns sought by banks ranged between 4.5% and 4.75%, steady from last week’s margin. The average rate for the one-month deposits declined slightly to 4.6407% from the previous week’s 4.6347%.

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.

The BSP’s Monetary Board last month kept rates unchanged on expectations of steady inflation and economic growth and as it monitors the impact of recent monetary adjustments.

The central bank left the interest rate on the BSP’s overnight reverse repurchase facility untouched at 4.5%. The interest rates on the overnight lending and deposit facilities were likewise held steady at five percent and four percent, respectively.

Sought for comment, BSP Deputy Governor Francisco G. Dakila, Jr. said on Wednesday: “Mayroon talagang mga (There are really) changes [in demand]. We predicted it.”

BSP Governor Benjamin E. Diokno has said the increase in demand for the TDF is partly attributable to excess liquidity caused by recent reductions in banks’ reserve requirement ratios (RRR).

After a 100-basis point (bp) RRR cut across all banks last May 31, the BSP trimmed the reserve ratios of universal and commercial lenders and thrift banks by another 50 bps last June 28 to 16.5% and 6.5%, respectively.

Another 50-bp reduction will be implemented on July 26 to finally bring the RRR of big banks to 16% and thrift banks to 6%, which completes the phased cuts the BSP announced in May. — R.J.N. Ignacio