Term deposit yields inch down as demand soars

YIELDS ON THE Bangko Sentral ng Pilipinas’ (BSP) term deposits slipped further on Wednesday as bids climbed amid ample liquidity in the market.

Bids for the BSP’s term deposit facility (TDF) hit P549.345 billion on Wednesday, going beyond the P360-billion offering. This also surpassed the P526.55 billion in tenders last week for the P320 billion on the auction block.

The one-week term deposits lured tenders totaling P214.785 billion, higher than the P140 billion up for grabs as well as the P198.595 billion in bids seen last week.

Yields on the seven-day papers ranged from 1.75% to 1.7564%, a slightly slimmer band compared to the 1.75% to 1.7588% margin last week. This caused the average rate for the tenor to settle at 1.7535%, down by 0.19 basis point (bp) from last week’s 1.7554%.

Meanwhile, the 14-day papers fetched bids amounting to P210.68 billion, going beyond the P140-billion offering and also beating P201.9 billion in tenders last week for the P110 billion on the auction block.

Banks asked for returns ranging from 1.75% to 1.762%, a wider band compared to the 1.75% to 1.757% logged a week ago. This caused the average rate for the two-week papers to settle at 1.7543%, inching down by 0.06 bp from the 1.7549% fetched last week.

For the 28-day tenor, tenders hit P123.88 billion, higher than the P80-billion offering as well as the P126.06 billion in bids on July 22 versus P70 billion up for grabs.

Lenders sought yields from 1.75% to 1.798%, a tad wider than the 1.75% to 1.76% band seen last week. With this, the tenor’s average rate stood at 1.7594%, inching up by 0.34 bp from the 1.756% recorded a week ago.

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

Wednesday’s auction results show there is enough cash in the system, said BSP Deputy Governor Francisco G. Dakila, Jr.

“Sustained market interest in the TDF indicated continued ample liquidity in the financial system amid the ongoing public offering of the Bureau of the Treasury’s five-year retail Treasury bonds (RTB),” Mr. Dakila said in a statement.

National Treasurer Rosalia V. de Leon last week said the amount raised from the RTB offer has already surpassed the P310 billion in three-year RTBs sold in February.

The five-year RTBs have a fixed coupon rate of 2.625% and are available for investors until Aug. 7 through selling agent banks and several online platforms.

Meanwhile, the stronger peso “may have also helped the slightly lower TDF auction yields recently,” said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

The peso has been trading within the P49-per-dollar range these past weeks despite market volatility. It closed at P49.19 on Wednesday, unchanged from its finish on Tuesday.

This was the peso’s strongest finish in nearly three years or since the P49.17-per-dollar close on Nov. 15, 2016. — Luz Wendy T. Noble