Yields on term deposits mixed

YIELDS ON term deposits ended mixed on Wednesday despite strong demand, with investors holding on to their cash as they remained cautious over geopolitical issues.

The central bank received bids amounting to P76.055 billion for its term deposit facility (TDF) on Wednesday, well above the P40 billion it wanted to sell.

However, this amount was still lower than the P76.753 billion in bids the Bangko Sentral ng Pilipinas (BSP) received last week against an P80-billion offering.

The seven-day papers received P24.905 billion worth of bids, higher than the P10 billion on offer as well as last week’s tenders which totalled P19.228 billion versus the P20-billion offering.

Accepted yields for this tenor ranged from 4.3% to 4.992%, a wider margin compared to last week’s 4.25-4.74% range. This caused the average rate to settle at 4.4141%, 7.11 basis points (bp) lower than last week’s 4.4852%.

Meanwhile, the 14-day deposits fetched total tenders worth P22.98 billion, more than double the P10 billion offered by the central bank. However, this declined from the P24.322-billion in bids received for the tenor last week for a P20-billion offer.

Banks asked for returns ranging from 4.4% to 4.5%, a narrower margin versus last week’s 4.375%-4.6% band. The average yield for the tenor clocked in at 4.4352%, down 7.03 bps from the 4.5055% fetched at the last auction.

On the other hand, demand for the 28-day papers hit P28.17 billion yesterday, filling the P20 billion offered by the BSP but dropping from the P33.203-billion worth of bids seen last week, which was for a P40-billion auction volume.

Yields sought by lenders fell between 4.4% and 4.5922%, a narrower range versus last week’s 4.375%-4.7%. The tenor’s average rate stood at 4.495%, 1.18 bps higher than the 4.4832% logged last week.

“Local participants broadly remained cautious, flocking toward the shorter 7- and 14-day tenors amid lingering market caution on trade tensions between the US and China and ahead of key monetary policy decisions from the European Central Bank, US Federal Reserve and the Bangko Sentral ng Pilipinas this month,” a trader said.

“The aforementioned major market movers contributed to the strong bids on the shorter tenors and the rise on the longer 28-day tenor,” the trader added.

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

BSP Governor Benjamin E. Diokno last week said the central bank is looking to cut benchmark rates by another 25 bps before the end of the year.

The central bank has cut interest rates by a total of 50 bps so far this year to 4.25% for the overnight reverse repurchase rate, 4.75% for overnight lending and 3.75% for overnight deposit.

The BSP’s Monetary Board will have its next policy meeting on Sept. 26. — LWTN