YIELDS ON term deposits declined as demand went up on Wednesday ahead of the central bank’s policy meeting.
Bids for the term deposit facility (TDF) went up to P123.414 billion on Wednesday from the P78.639 billion received last week, above the P80 billion the Bangko Sentral ng Pilipinas (BSP) wanted to sell.
Broken down, bids for the seven-day papers totalled P31.187 billion, more than the P30 billion on offer but a bit lower than the P31.247 billion recorded last week.
Banks asked for yields ranging from 4.5% to 4.75%, a narrower margin compared to last week’s 4.5-4.99%, data from the BSP showed. Bids settled at 4.5844%, lower by 1.23 basis points (bps) from last week’s 4.5967%.
Meanwhile, demand for the 15-day notes amounted to P44.427 billion, above the P30 billion on offer and higher than the P29.777 billion seen the previous week.
Banks sought yields ranging from 4.5% to 4.71%, a smaller margin compared to 4.5-4.795% range last week. The average yield for this tenor stood at 4.6176%, down 3.72 bps from the 4.6548% seen last week.
The 28-day deposits were likewise oversubscribed as bids came in at P41.8 billion versus the P20 billion placed on the auction block, outpacing the P27.615 billion seen in last week’s offering.
Accepted yields ranged between 4.5% and 4.7%, lower compared to the 4.55%-4.845% range in the previous auction. The average yield settled at 4.6033%, down by 8.2 bps from last week’s 4.6853%.
The TDF is the central bank’s main instrument to mop up excess cash in the financial system and to better guide market interest rates.
Currently, the country’s key policy rates range from 4% to 5%.
All eyes are on the BSP’s Monetary Board as the market expects it to ease key interest rates by as much as 25 bps in its fifth policy meeting for the year this afternoon, which if realized, could bring borrowing costs to 3.75-4.75%.
BSP Governor Benjamin E. Diokno expects to cut policy rates by 50 bps this year, according to a Bloomberg report.
Meanwhile, after the last tranche of the BSP’s the 200-bp multi-phased reduction of banks’ reserve requirement ratios was implemented last July 26, reserve quotas of big banks and thrift banks now stand at 16% and 6%, respectively. — Mark T. Amoguis