TDF offers oversubscribed as demand recovers

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By Melissa Luz T. Lopez,
Senior Reporter

BANKS swarmed the central bank’s term deposit offerings yesterday, with the overwhelming demand driving yields down from the previous week.

Bids for term deposits offered by the Bangko Sentral ng Pilipinas (BSP) reached P166.956 billion on Wednesday, well above the P140 billion the central bank wanted to sell. It also picked up from the P148.378 billion tenders received during the Oct. 4 auction, as both the week-long and month-long tenors going oversubscribed this week.

Offers for the seven-day term deposits reached P64.076 billion, surging from the P53.545-billion demand posted a week ago and accounting for 1.6 times the P40 billion which the BSP placed on the auction block.

As a result, the average rate dropped to 3.3554% from the 3.3664% yield the previous week, as banks asked for returns ranging from 3.23-3.38%.

Banks also returned to tapping the 28-day tenor this week, posting the first oversubscription in weeks as they vied to place as much as P102.88 billion, slightly above the P100 billion dangled by the central bank.

Market players even went as far as asking for the lowest rate allowed by the BSP, with interest rates ranging from 2.5-3.5%. This brought the average rate to 3.4925%, inching lower from last week’s 3.4939%.

The TDF is currently the central bank’s main instrument in mopping up excess money supply in the financial system, as the platform allows banks to park funds which they cannot deploy for loans for a small return.

Central bank officials previously said that there appears to be “renewed interest” in the weekly term deposit offerings, given robust growth in domestic liquidity and bank lending.

Bank credit grew by a fifth in August from a year ago, which came alongside a 15.4% increase in domestic money supply, according to latest BSP data.

BSP Deputy Governor Diwa C. Guinigundo said last week that banks may have also chosen to place their funds under the facility in order to “diversify” asset deployment, with a preference for short-termed instruments like the TDF amid market uncertainty on global interest rate developments.

Bank placements on term deposits have been on a decline as they sustain lending activities, investments, and foreign exchange purchases, Mr. Guinigundo has said.

The BSP will again offer another P140 billion in term deposits next week, split between P100 billion under the month-long tenor and P40 billion for the week-long term.