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TDF demand thins amid lingering uncertainties

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BSP
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By Melissa Luz T. Lopez, Senior Reporter

DEMAND for term deposits grew even weaker yesterday, with banks crowding the week-long tenor as they take a wait-and-see stance on developments in financial markets.

Bids for the term deposit facility (TDF) reached P100.634 billion on Wednesday, just matching the P100 billion offered by the Bangko Sentral ng Pilipinas (BSP) and slipping further from the P113.158-billion tenders a week ago.

Players rebalanced their positions to bet big on the week-long term deposits, leaving the two-week and one-month instruments undersubscribed for the second straight week.

The seven-day tenor attracted offers worth P64.409 billion, picking up from last week’s P58.282 billion to again surpass the P40 billion which the central bank wanted to sell.

As a result, the average yield sought by banks inched lower to 3.6927% from the 3.6979% fetched the previous week. This came as bidders asked for returns from a narrow 3.6-3.7% range.

Appetite for the 14-day deposits also thinned, as tenders amounted to just P28.016 billion against a P40-billion offering. This also slipped from the P39.095 billion bids received a week ago. The tepid demand pushed the average yield to 3.7342% from 3.7222% previously.

Demand for the 28-day term also remained slumped as the BSP only shored up P8.209 billion, barely half the P15.781 billion received a week ago and well below the P20-billion offering. In turn, yields sought by players rose to average 3.7326% from 3.7264% the prior week.

The TDF is the central bank’s main instrument in capturing excess cash in the financial system. The BSP actively adjusts auction amounts each week in order to bring market and interbank rates within its desired spread, which currently ranges from 2.75-3.75% since May 10.

BSP officials have said that banks are avoiding long lock-in periods at a time of uncertainties in the domestic and global financial markets. In particular, BSP Deputy Governor Diwa C. Guinigundo has said that they have seen stronger preference on overnight facilities rather than lock down their cash for several days or weeks under the central bank.

Yesterday’s auction comes ahead of the BSP’s rate-setting meeting, and follows a fresh rate hike from the United States Federal Reserve last week.

Next week, the central bank’s TDF offer will remain steady at P100 billion — P40 billion apiece in the seven-day and 14-day term and P20 billion worth of the 28-day deposits.