TDF yields rise to all-time highs

YIELDS on the central bank’s term deposits climbed on Wednesday. — PHILSTAR/KRIS JOHN ROSALES

By Melissa Luz T. Lopez, Senior Reporter
YIELDS on term deposits soared to all-time highs this week as banks scrambled to park their idle funds under the Bangko Sentral ng Pilipinas (BSP), taking advantage of higher accepted margins following a strong rate hike last week.
Demand for the short-term papers reached P147.79 billion yesterday, up from the P110.185 billion fetched a week ago to log well beyond the P100 billion on the auction block. The marked recovery in bids came after the central bank raised policy rates by 50 basis points (bp) during their Thursday meeting.
All three tenors under the term deposit facility (TDF) stood oversubscribed, marking a strong rebound for the two-week and one-month tenors which received tepid demand during last week’s auction which was the eve of the BSP’s rate-setting meeting.
The Monetary Board made its strongest tightening move in a decade last week amid signs that inflation could remain elevated until 2019. Key rates — the spread banks can ask for during TDF auctions — now range from 3.5-4.5%,
As a result, yields sought by banks climbed by more than 30 bps across three instruments.
Banks wanted to place P50.537 billion under a seven-day term, down from the P65.44 billion bids received the previous week but still well above the P40 billion placed on the auction block. Despite the overwhelming demand, lenders asked for an average of 4.1759% in returns, coming from a spread of 3.7-4.258% and nearly 40 bps above the 3.7797% fetched the previous week.
Tenders for the 14-day deposits nearly doubled to P62.531 billion this week, surpassing the P40 billion which the central bank wanted to sell. This also recovered from the pale P33.285 billion demand posted during the Aug. 8 offering.
Rates fetched averaged 4.2449% as banks sought for margins from a wide range of 3.525-4.36%. This also climbed by 32 bps from the 3.9234% posted the previous week.
Lenders also placed bigger bets on the 28-day tenor, with bids reaching P34.722 billion against a P20-billion offer. This also improved from the P11.46 billion placements made by banks a week ago. In turn, yields rose to 4.2844%, also 32 bps higher than the 3.962% fetched previously.
The TDF is currently the central bank’s main tool to capture excess money supply in the financial system. The BSP hosts the weekly auctions of short-term papers to bring market and interbank rates within its desired spread.