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Term deposit yields drop

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term deposit facility (TDF)
BW FILE PHOTO

By Melissa Luz T. Lopez
Senior Reporter

YIELDS ON term deposits went down yesterday, with demand posting a slight recovery as the holidays drew to a close, arming banks with more cash at their disposal.

Bids for the placements reached P46.086 billion on Wednesday, shooting beyond the modest P30 billion which the Bangko Sentral ng Pilipinas (BSP) offered to sell and improving from the P35.219 billion in tenders during the Dec. 27 auction.

Stronger appetite came even after the central bank slashed the auction volume to P30 billion for the week, which is the lowest level seen since the maiden offerings for the term deposit facility (TDF) back in June 2016.

As a result, rates for the one-week, two-week and one-month tenors declined across the board.

Demand for the seven-day placements amounted to P16.731 billion, lower than the P18.714 billion which the central bank accepted a week ago. However, the bids also went above the P10 billion which the central bank placed on the auction block.

In turn, this drove accepted yields to a 5.0784% average, spelling an 11.2 basis point (bp) drop from 5.1903% fetched last week.

Meanwhile, the 14-day tenor saw greater action as banks doubled their offers to P15.092 billion from P8.698 billion previously. This brought the tally above the P10-billion offering, while the average rate also inched lower to 5.1319% from 5.2014%.

The 28-day papers were also met by strong market interest. Tenders reached P14.263 billion, nearly double the P7.807 billion received a week ago to fill the BSP’s offer worth P10 billion.

In turn, the average yield also slid 4.2 bps to 5.1672% from the 5.2094% logged the week prior.

The TDF is the central bank’s main tool to mop up excess money supply in the financial system. Through the weekly auctions, the BSP can usher market and interbank rates closer to its desired range of 4.25-5.25% by setting the standard for short-term instruments through the yields which they accept.

The window has seen narrower bids over the past few weeks as banks chose to hold more cash to service increased client demand during Christmas.

“As we indicated in the past, we expect funds to start coming back to the banks after the holiday season. It was rather fast that the exodus took place right after New Year,” BSP Deputy Governor Diwa C. Guinigundo said in a text message when sought for comment.

However, the quick recovery in demand shows that market liquidity “is not actually tight,” as lenders are able to replenish their cash positions.

Given this week’s turnout, the BSP decided to raise the offering for the Jan. 9 auction. Up for grabs are P20 billion each for the one- and two-week tenors and P10 billion under a month-long lock-in, for a total of P50 billion.