YIELDS ON term deposit mostly went lower with lenders awaiting the upcoming holidays and the policy stance of the central bank for its final policy meeting this Thursday.

Tenders for the central bank’s term deposit facility (TDF) totaled P181.538 billion on Wednesday, a bit higher than the P180 billion on offer, according to data from the Bangko Sentral ng Pilipinas (BSP).

The week’s tenders also surpassed the P175.528 billion in bids the BSP received last week for the P170 billion placed on the auction block.

Banks’ tenders for the seven-day term deposits amounted to P66.835 billion, going beyond the P60 billion auctioned and also higher than the P56.572 billion in bids seen last week.

Yields for the one-week paper were seen from 4.125% to 4.4%, a thinner band compared to last week’s range of 4.125-4.45%. This resulted in an average rate of 4.304%, higher by 2.06 basis points (bps) from last week’s 4.2834%.

For the 15-day papers, total bids hit P69.993 billion, higher than the P60 billion auctioned and also beating the P67.388 billion bids seen last week.

Lenders asked for returns ranging from 4.3% to 4.4055%, a narrower margin compared to the 4.235-4.4188% range last week. The average rate for the two-week deposits was at 4.3249%, dipping by 0.6 bp from the 4.331% logged on Dec. 4.

Meanwhile, 28-day deposits fetched tenders totaling P44.71 billion, which did not fill the P60 billion offered by the BSP and also lower than the P51.568 billion in tenders seen last week for the P50 billion placed on the auction block.

Rates for the one-month papers were seen from 4.29% to 4.49%, a slimmer margin compared to last Wednesday’s 3.5-4.4948%. This resulted in an average rate of 4.3496%, lower by 0.26 bp from last week’s 4.3522%.

The TDF is the BSP’s main tool to shore up excess liquidity in the financial system and to better guide market interest rates.

Economists said the upcoming holidays and the Monetary Board meeting scheduled this Thursday may have affected TDF yields this week.

“The bias toward the seven-day issues may mean that financial institutions are already anticipating their customers’ needs as the holidays are fast approaching. It may also stress the growing liquidity in the market as already seen in last month’s M3 (liquidity),” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

He added that the bias towards seven-day papers may continue as the market prepares for the upcoming holidays.

Latest data from the BSP showed domestic liquidity grew by 8.5% year on year to P12.1 trillion in October, picking up from the 7.7% growth pace in September. M3 grew by 0.9% on a month-on-month basis.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the TDF results to a possible cut in interest rates for the last time in 2019.

“Possible cut in the local policy rates on the next monetary policy-setting meeting amid relatively low/benign inflation data despite some slight uptick recently to 1.3% in November 2019, mathematically amid diminishing inflation base/denominator effects, also still support the latest slight declines in BSP TDF auction yields,” he said in an e-mail.

The BSP has reduced benchmark interest rates by a total of 75 bps in 2019, which partially counteracted the 175 bps worth of rate hikes in 2018 amid a multi-year inflation environment that peaked at 6.7% in September and October.

This has decreased key policy rate to four percent for the overnight reverse repurchase facility, while overnight deposit and lending rates were reduced to 3.5% and 4.5%, respectively.

The BSP’s Monetary Board will meet for its eighth and last policy meeting for the year this Thursday. — Luz Wendy T. Noble