Term deposits fetch mixed rates as gov’t favors local borrowings

YIELDS on the central bank’s term deposits ended mixed as the government said its borrowing program will continue to have a bias for the local market. — BW FILE PHOTO

YIELDS ON term deposits offered by the Bangko Sentral ng Pilipinas (BSP) were mixed on Wednesday as the country’s Finance chief said the government is looking to borrow more from the domestic market next year.

Bids for the BSP’s term deposit facility (TDF) amounted to P574.19 billion on Wednesday, higher than the P470 billion on the auction block. However, this was lower than the P677.985 billion in tenders last week for the P480 billion on offer, which included one-month deposits.

Broken down, demand for the seven-day papers totaled P254.485 billion, going beyond the P220-billion offering as well as the P233.945 billion in tenders logged on Oct. 7.

The one-week term deposits fetched rates ranging from 1.8% to 1.9%, a wider margin compared with the 1.825% to 1.86% recorded a week ago. This caused the average rate for the tenor to settle at 1.8466%, increasing by 0.35 basis point (bp) from the 1.8431% seen the prior auction.

Meanwhile, bids for the 14-day deposits amounted to P319.705 billion, higher than the P250 billion auctioned off by the central bank but lower than the P336.33 billion in tenders logged a week ago for the P220 billion up for grabs.

Lenders asked for yields ranging from 1.78% to 1.87%, a wider margin compared with the 1.8215% to 1.8598% band in the previous auction. With this, the average rate for the two-week papers stood at 1.8426%, dropping by 0.66 bp from the 1.8492% fetched a week ago.

The 28-day papers were not offered for this week’s auction. BSP Governor Benjamin E. Diokno has said the TDF tenor will eventually be phased out as the central bank last month started offering bills of the same term.

The TDF and the BSP’s securities are among the central bank’s main tools to gather excess liquidity in the financial system and to better guide market interest rates.

“The TDF auction results reflect sustained high level of liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

“Moving forward, the BSP will continue to review and gradually recalibrate its monetary operations, guided by its assessment of market developments and liquidity conditions,” Mr. Dakila added.

Rates for the term deposits ended mixed on signals from the government’s top economic manager on the country’s preference for local borrowings, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message yesterday.

“Auction yields were mixed after the Department of Finance signalled preference for commercial borrowings and possibly more borrowings from the BSP by the National Government for 2021,” Mr. Ricafort said.

Finance Secretary Carlos G. Dominguez III said in a Bloomberg interview that the government might look to tap the central bank again next year “if the economy doesn’t perform well.” Another option is to go back to the commercial debt market, Mr. Dominguez added.

Earlier this month, the National Government received P540 billion in fresh provisional advances to help plug the budget deficit amid the crisis. In total, the BSP has already lend out P840 billion to the National Government, only P10 billion short of the P850-billion limit set by the Republic Act 11494 or the Bayanihan to Recover as One Act.

Meanwhile, the BTr said on Monday it will no longer push through with its panda and samurai bond offerings originally targeted for this year, but is still keen to auction off a second batch of Premyo bonds. — L.W.T. Noble