YIELDS ON term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) dropped on Wednesday, with liquidity levels normalizing after the settlement of the government’s retail Treasury bonds (RTBs).

Bids for the BSP’s term deposit facility (TDF) hit P372.23 billion on Wednesday, surpassing the P230-billion offering. It also beat the P264.94 billion in tenders seen in the previous auction versus the P320-billion offering.

The one-week papers attracted tenders totaling P135.31 billion, going beyond the P90-billion offering, as well as the P98.58 billion in bids logged the previous week.

Accepted yields for the seven-day deposits ranged from 1.75% to 1.8%, a thinner margin than the 1.75% to 2.25% seen on Aug. 12. With this, the average rate of the papers stood at 1.7708%, down by 1.02 basis point (bps) from the 1.781% seen a week ago.

For the 14-day term deposits, bids totaled P157.75 billion, higher than the P90 billion up for grabs and the P104.13 billion in tenders last week for the P130 billion on the auction block.

Banks sought returns ranging from 1.75% to 2%, a slimmer band compared to the 1.75% to 2.625% seen in the previous auction. This brought the average rate of the two-week deposits to 1.8347%, decreasing by 3.11 bps from the 1.8658% logged at last week’s auction.

Meanwhile, demand for the 28-day papers totalled P79.17 billion, surpassing the P50-billion on offer as well as the P62.23 billion in tenders seen last week.

Banks asked for returns ranging from 1.7532% to 2%, a wider range than the 1.7527% to 1.8125% margin logged on Aug. 12. This brought the average rate for the tenor to 1.8232%, rising by 4.62 bps from the 1.777% seen a week ago.

The TDF is the central bank’s main tool to gather excess liquidity in the financial system to better guide market interest rates.

“The auction results show that liquidity conditions have normalized following the temporary effect of the scheduled settlement of the Retail Treasury Bonds last week, and remains ample,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The government sold a record P516.3 billion in RTBs in a three-week offering which closed on Aug. 7. Proceeds from the transaction will fund the government’s pandemic response amid falling revenues from tax collections due to business disruptions. — L.W.T. Noble