YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits slipped on Wednesday after the reduction in smaller banks’ reserve requirement ratios.

Tenders for the BSP’s term deposit facility (TDF) totaled P526.55 billion on Wednesday, more than the P320 billion on the auction block. This was also above the P510.385 billion in bids logged last week for the P260-billion offer.

The seven-day papers attracted bids amounting to P198.595 billion, surpassing the P130 billion on offer as well as the P216.735 billion seen on July 15.

Accepted yields for the one-week term deposits ranged from 1.75% to 1.7588%, a slightly wider band compared to the 1.75% to 1.76% margin seen last week. With this, the average rate for the tenor stood at 1.7554%, dipping by 0.03 basis point (bp) from last week’s 1.7557%.

For the 14-day papers, tenders hit P201.9 billion, higher than the P120 billion on the auction block and also beating the P184.52 billion in bids last week for the P110 billion up for grabs.

Lenders asked for returns ranging from 1.75% to 1.757%, a marginally slimmer band compared to the 1.75% to 1.76% recorded a week ago. This caused the average rate for the two-week papers to settle at 1.7549%, down by 0.15 bp from the 1.7564% fetched in the previous offering.

Meanwhile, the 28-day tenor was met with bids totaling P126.06 billion, higher than the P70 billion auctioned off by the central bank as well as the P109.13 billion seen a week ago for the P60 billion on offer.

Yields on the one-month papers ranged from 1.75% to 1.76%, thinning slightly from the 1.75% to 1.765% margin seen last week. This caused the tenor’s average rate to settle at 1.756%, 0.25 bp lower than the 1.7585% recorded a week ago.

The TDF is the central bank’s primary tool to mop up excess liquidity in the financial system and to better guide market interest rates.

“[The] results show continued market interest for the BSP’s deposit facilities even with the public offering of the Bureau of the Treasury’s Retail Treasury Bonds, indicating sufficient liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The marginally lower yields came following the latest reserve requirement ratio (RRR) cut announced by the Bangko Sentral ng Pilipinas on Tuesday, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“The least slight easing in TDF auction yields came a day after the surprise 100-bps cut in the RRR of thrift banks and rural/cooperative banks that effectively infuse about P10 billion of additional peso liquidity into the financial system,” Mr. Ricafort said in a text message.

The reduction will bring down the reserve ratios of thrift banks to three percent and to two percent for rural and cooperative banks effective July 31.

This followed the 200-bp reduction in the RRR of universal and commercial banks to 12% in April.

The Monetary Board is authorized to slash banks’ RRR by up to 400 bps this year to boost liquidity in the financial system amid the ongoing crisis. — Luz Wendy T. Noble

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