YIELDS ON term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) mostly fell on Wednesday ahead of the central bank’s maiden offering of securities on Friday.

Tenders for the BSP’s term deposit facility (TDF) reached P527.984 billion on Wednesday, well beyond the P350 billion on the auction block. However, it failed to beat last week’s P541.442 billion, which was against P360 billion up for grabs.

Broken down, for the seven-day papers, tenders totaled P212.569 billion yesterday, going beyond the P160 billion auctioned off by the central bank as well as the P197.394 billion in bids logged a week ago.

Accepted yields ranged from 1.785% to 1.89%, a narrower band compared to the 1.7788% to 1.9% recorded on Sept. 9. This caused the one-week paper’s average rate to rise to 1.8377%, inching up by 1.01 basis points (bps) from the 1.8276% seen in the previous auction.

Meanwhile, the 14-day papers attracted bids worth P265.685 billion, higher than the P170 billion on the auction block and the P250.278 billion in tenders logged the previous week for the P160 billion on offer.

Banks asked for yields within the 1.8% to 1.87% range, a slightly lower band compared to the 1.82% to 1.875% seen last week. This brought the average rate of the 14-day papers to 1.846%, down by 0.19 bp from the 1.8479% logged on Sept. 9.

On the other hand, demand for the 28-day papers amounted to P49.73 billion, more than the P20 billion on offer but lower than the P93.77 billion in bids logged for the P50-billion offering a week ago.

Rates for the one-month paper ranged from 1.783% to 1.8522%, a wider band compared to the 1.825% to 1.87% recorded a week ago. This caused the tenor’s average rate to settle at 1.8409%, decreasing by 1.09 bps from the 1.8518% seen last week.

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

Yields were mostly lower at yesterday’s auction as investors were looking ahead to the offering of the central bank securities, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“The markets are anticipating the BSP’s 28-day debt auction on Friday as this would lead to the phaseout of the 28-day TDF tenor,” Mr. Ricafort said in a text message.

BSP Governor Benjamin E. Diokno said the central bank will auction P20 billion worth of 28-day securities on Friday, marking its first issuance of its own debt papers.

Mr. Diokno added the 28-day term deposits and BSP bills will be offered simultaneously on different days for now but the one-month deposits will soon be phased out.

“The inclusion of BSP securities issuance in the standard monetary operations of the BSP provides an additional instrument for managing liquidity in the financial system and supports the implementation of monetary policy under the interest rate corridor framework,” the BSP said in a statement last week. — L.W.T. Noble