TDF demand softens

By Melissa Luz T. Lopez, Senior Reporter
TERM DEPOSITS offered by the central bank saw softer demand this week ahead of the settlement of the government’s latest offering of retail bonds.
Bids for the term deposit facility (TDF) reached P113.158 billion yesterday, above the P100-billion offering of the Bangko Sentral ng Pilipinas (BSP) but lower than the P120.72-billion tenders received a week ago.
All three tenors saw offers drop compared to the June 6 auction, with the two-week and one-month term undersubscribed.
The seven-day papers received half the total demand as banks wanted to place P58.282 billion, higher than the P40 billion on the auction block but down from the P62.078 billion bids received the previous week.
Yields even slipped to average 3.6979% from the 3.7006% fetched the prior week, as players sought for returns within a narrow range of 3.625-3.72%.
Tenders for the 14-day term deposits amounted to P39.095 billion, barely filling the P40-billion offering and sliding from P45.367 billion previously. This pushed yields higher to a 3.7222% mean, compared to 3.6916% last week.
Meanwhile, banks shied away from the 28-day tenor anew. The central bank shored up only P15.781 billion tenders which is below the P20-billion offering, but improved from the P13.275 billion which players put forward a week ago. In turn, the average yield rose to 3.7264% from 3.7179%.
The TDF is the central bank’s primary tool in capturing excess funds in the system. The BSP actively adjusts auction amounts each week in order to bring market and interbank rates within its desired spread, which currently ranges from 2.75-3.75% following a rate hike announced on May 10.
BSP Deputy Governor Diwa C. Guinigundo said last week that banks are taking short positions given recent developments in the local financial market.
“They are all waiting and seeing,” Mr. Guinigundo told reporters, referring to the government’s latest issuance of retail Treasury bonds (RTB).
The central bank official said they have seen players place more funds on overnight facilities rather than have their funds locked in under longer periods ahead of the RTB settlement yesterday.
The Bureau of the Treasury raised P121.765 billion in three-year retail bonds as of Friday, which is well above the P30 billion they initially eyed to secure.
Mr. Guinigundo added that the central bank kept TDF offerings steady in light of the retail bonds.
“If we raise the volume, you will deprive the market of liquidity… The market will be unduly tight,” Mr. Guinigundo said. “If you raise the volume again next week, rates will rise again.”
For next week, the central bank will again offer P100 billion for the third straight time, split into P40 billion each for the seven and 14-day tenors and P20 billion under a month-long term.