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TDF yields steady despite offer’s undersubscription

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By Melissa Luz T. Lopez,
Senior Reporter

YIELDS on term deposits stood steady yesterday, with the sideways move driven by tempered demand for the instruments.

The 28-day tenor went back to an undersubscription this week, while demand for the week-long term deposits just matched the amount offered by the Bangko Sentral ng Pilipinas (BSP).

Banks wanted to place P131.455 billion under the term deposit facility (TDF), logging below the P140 billion that the central bank placed on the auction block and down from tenders worth P166.956 billion tallied a week ago.

In particular, yields inched downward for the week-long tenor, while interest rates for the month-long instruments stood barely changed.

Demand for the seven-day term deposits totalled P43.893 billion, slightly higher than the P40 billion which the BSP wanted to sell although lower than the P64.076-billion bids posted a week prior. Market players sought for returns ranging from 3.25-3.38% to average at 3.3402%, down from the 3.3554% fetched during the Oct. 11 auction.

On the other hand, bids for the 28-day tenor dipped to P87.562 billion, logging below the P100 billion which the BSP placed on the auction block and the P148.378 billion in tenders received a week ago. With the lower offers, the average rate moved to 3.4927%, little changed from the 3.4925% seen previously.

The TDF is currently the central bank’s main tool to shore up excess money supply in the financial system, as the platform allows banks to park funds which they cannot deploy for loans in exchange for a small return.

BSP Deputy Governor Diwa C. Guinigundo previously said rates have been moving closer to the 3% benchmark set by the central bank, adding that the reduced auction amounts have been calibrated to achieve this purpose.

Starting October, the central bank reduced the weekly auction volumes to P140 billion, split between P40 billion in week-long notes and P100 billion under a month-long tenor.

Another set of P140 billion worth of term deposits will be placed on the auction block next Wednesday.