By Melissa Luz T. Lopez, Senior Reporter
DEMAND for term deposits improved this week but failed to fill the auction amount set by the central bank, driving yields higher into the five percent level.
Banks wanted to place P69.643 billion under the term deposit facility (TDF) yesterday, higher than the P59.428 billion tenders received the previous week although still short of the P70 billion which the Bangko Sentral ng Pilipinas (BSP) wanted to sell.
Bids for all tenors improved, although appetite for the one-week papers settled just below the BSP’s offer weeks into the Christmas season.
Players put forward P36.406 billion in bids under the seven-day term, surging from the P28.894 billion placements a week ago. However, this fell short of the P40 billion which the central bank placed on the auction block.
Still, lenders asked for bigger margins for the term deposits, with the average yield rising to 5.0168% from the 4.942% fetched during the Nov. 28 exercise.
The 14-day papers also saw stronger demand as offers improved to P20.057 billion from last week’s P19.837 billion, with banks maximizing the P20-billion offering made by the BSP.
Players then sought for higher rates at 5.1271%, inching up from the 5.0715% fetched the prior week.
Appetite likewise improved for the 28-day deposits as tenders reached P13.18 billion on Wednesday, up from P10.697 billion previously to sustain a trend oversubscription.
Yields climbed ahead to 5.1433% from 5.1103% a week ago.
The TDF has been the central bank’s main tool in mopping up excess liquidity, which they also expect to push short-term interest rates. Through the weekly auctions, the BSP can bring market and interbank rates closer to its desired range by setting the standard for short-term instruments via the margins that they pay to bank for these placements.
The rise in TDF rates reflect market players taking advantage of higher policy rates after another hike worth 25 basis points took effect in November. This marked the fifth straight hike from the BSP this year, which brought benchmark rates between 4.25-5.25%.
BSP Deputy Governor Diwa C. Guinigundo said stronger appetite for the longer tenors are due to improving market sentiment.
“They can now afford to go a little longer knowing that lower inflation gives the BSP greater latitude in terms of monetary policy options,” the BSP official said in a text message.
He added that banks are likely holding on to more money to service bigger client payments and withdrawals, as demand for cash usually spikes going into the Christmas season.
Mr. Guinigundo likewise pointed out that liquidity will improve in the coming weeks given more dollar inflows from remittances, outsourcing revenues, and tourism, which often peak during the holidays.
The central bank is keeping its auction volumes steady for next week’s offering.