By Mark T. Amoguis, Senior Researcher
YIELDS ON term deposits dropped further on Wednesday as demand increased after the policy rate cuts implemented by the central bank last week.
Bids for the term deposit facility (TDF) reached P137.141 billion on Wednesday from the P123.414 billion received last week, above the P100 billion which the Bangko Sentral ng Pilipinas (BSP) wanted to sell.
Broken down, bids for the eight-day papers totaled P51.252 billion, more than the offered P40 billion and higher than the P37.187 billion recorded last week for a P30-billion auction volume.
Banks asked for yields ranging from 4.25% to 4.55%, a narrower margin compared to last week’s 4.5-4.75%. Bids settled at 4.4389%, lower by 14.55 basis points (bps) from last week’s 4.5844%.
Meanwhile, demand for the 14-day notes amounted to P40.747 billion, above the P30 billion on offer but lower than the P44.427 billion reached last week.
Lenders sought returns ranging from 4.25% to 4.59%, lower than the 4.5-4.71% range last week. The average yield for the tenor stood at 4.4905%, shedding 12.71 bps from the 4.6176% seen last week.
The 28-day deposits were likewise oversubscribed as bids totaled P45.142 billion versus the P30 billion placed on the auction block. This week’s tenders were also higher than P41.8 billion logged previously, although this was for a P20-billion offering.
Accepted yields ranged between 4.25% and 4.6%, below the 4.5%-4.7% margin in the previous auction. The average yield settled at 4.4961%, down 10.72 bps from last week’s 4.6033%.
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.
The central bank’s Monetary Board last week slashed policy rates by 25 bps. Current interest rates now range from 3.75% to 4.75%.
Markets are still waiting for an additional 25-bp cut this year, as previously signaled by BSP Governor Benjamin E. Diokno.
Meanwhile, the Monetary Board decided not to cut reserve requirement ratio (RRR) of banks last week.
Reserve quotas now stand at 16% for big banks and 6% for thrift banks following the last round of the 200-bp multiphased reduction in all RRRs last July 26.
The BSP chief said on Tuesday that the policy setting body will “pre-announce” its plans to slash banks’ RRR on a quarterly basis.