By Melissa Luz T. Lopez, Senior Reporter
BANKS scrambled to get hold of term deposits offered by the Bangko Sentral ng Pilipinas (BSP) yesterday, with the auction marked by overwhelming bids as the central bank accepted higher yields following a strong rate hike last week.
Demand for the term deposit facility (TDF) soared to P131.03 billion on Wednesday, double the P65.855 billion in offers put forward the previous week and well above the P60 billion on the auction block.
All tenors of the term deposits received offers above board as market players took advantage of a higher ceiling rate from the BSP, which pushed accepted margins to a record high since the weekly auctions started in June 2016.
The central bank has raised rates by a total of 150 basis points (bp) since May as policy makers fired off another 50-bp increase in policy settings last Thursday amid reports that inflation could breach a fresh high in September. As a result, TDF yields climbed by close to 30 bps across all maturities.
Tenders for the seven-day tenor rose to P77.305 billion from P51.627 billion a week ago, clocking well above the P40 billion which the central bank offered to sell. This came as banks sought for higher returns ranging from 4.42-4.75%. This placed the average yield at 4.7127%, 29 bps higher than the 4.4215% fetched during the Oct. 3 auction.
Appetite for the 14-day instruments also recovered this week, with the P10-billion offering met by P27.22 billion placements to recover from P9.643 billion previously. Yields also surged to average 4.7353%, adding 26.3 bps from 4.4722% a week ago.
The 28-day deposits also saw strong demand worth P26.505 billion, nearly five times the P4.585 billion offers during the previous exercise and more than double the P10 billion up for grabs. However, banks demanded for higher interest rates, with the average rising by 30 bps to 4.7884% from 4.4877%.
The TDF stands as the central bank’s primary tool to mop up excess cash in the financial system. The weekly auctions of short-term papers are meant to usher market and interbank rates within the current benchmark range of 4-5%.
Asked to comment, BSP Deputy Governor Diwa C. Guinigundo said the recovery in demand for TDF availments were largely the result of the central bank’s fresh tightening move, coupled with optimism due to upbeat state spending.
“One, government is spending and spending robustly on infrastructure and other public sector projects. Two, BSP’s policy rate hike which signals higher yields in the TDF,” Mr. Guinigundo said in a text message. “This is part of the recalibration of liquidity and the adjustment process towards greater macro stability.”
The key policy rate — which is used by banks as the benchmark for loan pricing — now stands at 4.5%, the highest level since March 2009.
For next week, the central bank has hiked its TDF offering to P80 billion — P50 billion for the seven-day term, P20 billion for the 14-day tenor and P10 billion for the 28-day papers.