Yields on term deposits end mixed

By Melissa Luz T. Lopez, Senior Reporter

YIELDS on term deposits saw mixed movements on Wednesday ahead of a break from trading, matching the reduced auction volume offered by the central bank.

Banks wanted to place as much as P90.705 billion under the term deposit facility (TDF) this week, slightly higher than the P90-billion offer made by the Bangko Sentral ng Pilipinas (BSP).

The figure declined from the P128.211 billion in offers made during the March 21 auction, which was also higher than the P110-billion auction size.

Reduced auction volumes for the two-week and one-month tenors led to a slight oversubscription.

Players wanted to park P46.485 billion under the seven-day tenor, which settled below the P50 billion placed on the auction block and slipping from the P72.293-billion demand seen a week ago. As a result, the average yield also slid to 3.1651% from 3.1768% previously.

Meanwhile, the BSP’s P30-billion offering for 14-day deposits was met by P32.133-billion tenders. This compares to the P35.955-billion bids the previous week, back when the auction amount stood at P40 billion.

Rates fetched moved higher to 3.2788% from 3.2451% a week ago.

The 28-day tenor saw the same results, with the P10-billion auction amount matched by offers worth P12.087 billion versus the P19.963 billion demand last week. This pushed yields to 3.4232% from 3.3416% during the previous auction.

The TDF is the central bank’s main tool to mop up excess funds in the financial system, especially after the regulator reduced the reserve requirement ratio imposed on universal and commercial banks to 19% of deposits which took effect this month.

BSP Governor Nestor A. Espenilla, Jr. has said that the adjusted volumes for term deposits is temporary, in anticipation of tepid demand for long-term placements ahead of this week’s Holy Week break. He noted that banks “want to hold more cash” over the holiday in order to service client withdrawals and purchases.

Financial markets will be closed on March 29-30 in observance of Maundy Thursday and Good Friday, as observed by Catholics. Trading resumes on April 2.

By next week, the BSP will be offering P50 billion in the seven-day tenor, P40 billion for the 14-day deposits, and P20 billion in P28-day papers, returning to the volumes seen during the March 21 week, which reflects the BSP’s expectations of a recovery in demand following the Lenten break.