By Luz Wendy T. Noble

YIELDS on the central bank’s term deposits mostly fell on Wednesday after another reserve requirement ratio (RRR) cut last week.

The rates also dipped as the market waits for economic data releases and another Monetary Board policy meeting in November.

Bids for the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility — a tool to shore up excess liquidity in the financial system and to better guide market interest rates — reached P82.093 billion, higher than the P80 billion in auction, central bank data showed.

The bids were still lower than the P100.489 billion worth of tenders the central bank received on Oct. 30 for the P90 billion it sold.

Tenders from banks for the seven-day notes amounted to P30.189 billion, slightly higher than P30 billion on offer but lower than last week’s P32.563 billion bids against the P20 billion in auction.

Accepted yields for the tenor ranged from 4.15% to 4.225%, compared with last week’s 4.138% to 4.225%.

This resulted in an average rate of 4.2053%, 0.02 basis point lower than last week’s 4.2055%.

Meanwhile, the 14-day paper attracted bids worth P22.925 billion, higher than the P20 billion on offer. This was lower than the P30.24 billion in tenders for a $30 billion offer volume last week.

Lenders went for returns of 4.15% to 4.283%, thinner than 4.15% to 4.3% a week earlier, data showed. The average rate for the two-week notes slipped to 4.2451% which was 0.29 basis point short of last week’s 4.248%.

On the other hand, 28-day term deposits got tenders worth P28.979 billion, lower than the P30 billion on offer. This was also lower than the P37.686 billion in tenders last week.

Accepted yields for the tenor ranged from 4.21% to 4.5%, increasing from the previous auction’s yields of 4.18 to 4.45%. This brought the one-month paper’s average rate to 4.2886%, 4.06 bps higher than last week’s 4.248%.

The lower yields in the seven- and 14-day debt paper come ahead of data releases and the policy meeting this November.

“The decline in the seven- and 14-day tenors was caused by participants preferring the shorter deposit tenors ahead of major local economic releases next week and the Monetary Board meeting by mid-November, which has also eased off some demand toward the longer 28-day tenor,” a trader said in an email.

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort traced the mostly marginal lower auction yields to last week’s surprise reserve requirement ratio cut.

“BSP TDF auction yields were mostly marginally lower after the surprise 1-percentage point cut in larger banks’ reserve requirement ratio on Oct. 24 effective December 2019 that would result in additional peso liquidity,” he said.

“More peso funds would still lead to some easing of short-term interest rates,” he added.

The policy-making Monetary Board cut the ratio for the fourth time this year by another 100 basis points, which will be effective by December.

This will bring the reserve ratio of universal and commercial lenders as well as nonbank financial institutions to 14%, while that of thrift banks will be at 4%. The 3% reserve requirement ratio for rural banks was kept.

The central bank earlier said the cut was in line with its reform agenda to promote a more efficient financial system by lowering financial intermediation costs. It would also ensure sufficient domestic liquidity in support of economic activity, it said.

The Monetary Board has two more policy meetings left for the year, scheduled for Nov. 14 and Dec. 6.

The Philippine Statistics Authority (PSA) is set to release October inflation data and third-quarter gross domestic product (GDP) figures on Nov. 5 and Nov. 7, respectively.

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