By Melissa Luz T. Lopez, Senior Reporter
BANKS grew more comfortable about betting on term deposits this week, particularly the one-week tenor, ahead of the central bank’s policy meeting today.
Demand for term deposits rose to P51.196 billion on Wednesday, better than the P42.805 billion in tenders received a week ago to surpass the P50 billion which the Bangko Sentral ng Pilipinas (BSP) put up for auction.
Nearly half of the bids went to the one-week papers, which prompted mixed movements in yields fetched across tenors.
Offers received for the seven-day deposits surged to P22.593 billion, doubled the P11.576 billion logged the previous week and surpassing the P20 billion which the central bank wanted to sell.
Amid the strong demand, the average yield climbed to 5.1411% for the week-long papers, rising from the 5.0654% fetched during the Jan. 30 exercise.
In contrast, appetite for the 14-day tenor softened to P16.9 billion, slipping further from the P18.806 billion offers received a week ago and failing to fill the P20 billion which the BSP placed on the auction block.
Players pushed their luck and asked for higher returns ranging from 5.1-5.25%, the ceiling of the BSP’s interest rate corridor. Despite this, the average yield even slipped to 5.1765%, a tad lower than the 5.1770% rate seen the previous week.
Interest towards the 28-day papers stood broadly steady yesterday to settle at P11.703 billion, slipping slightly from the P12.423 billion in tenders received the prior week.
This also prompted banks to ask for bigger returns, with the average yield climbing to 5.1788% versus the previous week’s 5.1779% rate.
The central bank has been relying on the term deposit facility (TDF) as its main tool in capturing excess funds in the financial system. Through the weekly auctions, the BSP is looking to bring market and interbank rates closer to its desired range of 4.25-5.25% through the yields which they accept.
The strong appetite for the one-week tenor comes a day before the Monetary Board’s first interest rate review this year. Market watchers are unanimous in their view that the BSP will keep policy settings steady, following dovish cues from two senior officials about the need to pause and allow the economy to absorb the rate hikes introduced in 2018.
BSP Deputy Governor Diwa C. Guinigundo said on Tuesday that the even lower inflation print in January at 4.4% gives the central bank “more space to review its current monetary policy,” building on his previous comments that authorities cannot immediately reverse the cumulative 175 basis-point increase in benchmark rates which they fired off last year.
Mr. Guinigundo added that cuts to required bank reserves may be ill-timed for now, with latest inflation readings lower but still above the 2-4% target range.
BSP Deputy Governor Maria Almasara Cyd Tuaño-Amador previously said that the central bank can afford to allow previous policy hikes to “work their way through the system,” noting that future rate decisions will be “timely” and “prudent.”
Any adjustments to the benchmark borrowing rates will also affect acceptable yields under the TDF.