Yields on one-week term deposits drop

YIELDS on the one-week term deposits eased on Wednesday as the central bank lowered the volume of its facility to a record low.

Tenders for the term deposit facility (TDF) amounted to P30.15 billion on Wednesday, much lower than P50.321 billion in tenders received a week ago but more than thrice the P10 billion the Bangko Sentral ng Pilipinas (BSP) placed on the auction block.

Still, the decline in bids came as the TDF auction volume was cut to the lowest on record, with the BSP not offering 14- and 28-day papers this week.

Compared with the total tenders for the seven-day tenor last week, demand climbed a tad from April 10’s P29.696 billion.

Banks sought lower returns for the seven-day term deposits, with accepted yields ranging between 4.75% and 4.8% from the previous week’s 4.85-4.97% spread.

This led to an average rate of 4.7764%, lower than 4.8943% fetched in the previous TDF offering.

The TDF stands as the central bank’s primary tool to shore up excess funds in the financial system and to better guide market interest rates. Through the weekly auctions, the BSP wants to bring loan and interbank rates within their desired 4.25-5.25% range.

BSP Deputy Governor Diwa C. Guinigundo has repeatedly stressed that any perceived tightness in money supply is “temporary,” as financial firms continue to sit on piles of cash largely from deposits.

Next week, the central bank will offer eight- and 14-day term deposits worth P10 billion each.

“Offered tenors were adjusted in view of the regular public holidays on May 1 and June 12 which fall on a Wednesday,” the central bank said. — Karl Angelo N. Vidal