By Melissa Luz T. Lopez,
Yields under the central bank’s term deposit facility (TDF) moved sideways yesterday despite tepid demand, as banks opted to hold on to their funds as they anticipate bigger cash requirements ahead of another long weekend.
Term deposits on offer fetched P158.171 billion in total bids on Wednesday, posting a slight pickup from the P153.379 billion the previous week but still settled below the P180 billion which the Bangko Sentral ng Pilipinas (BSP) placed on the auction block.
The seven-day tenor attracted a mere P40.836 billion in total tenders, just a tad above the central bank’s P40-billion offering and down from P50.051 billion a week ago.
Despite the weaker demand, the average yield sought by banks even slipped to 3.3124%, lower than the 3.3241% tallied during the Aug. 16 auction. The lenders asked for returns ranging from 3.28-3.35% as they parked their extra funds at the BSP.
Meanwhile, bids for the 28-day term deposits recovered to P117.335 billion, up from last week’s P103.328 billion but still logged below the P140 billion auctioned by the central bank. The average interest rate steadied at 3.4958%, unchanged from last week’s yield and logging just below the 3.5% ceiling set by the BSP.
The TDF has been the central bank’s main tool to capture excess money supply in the financial system, where banks can park idle funds for a small return.
“We expect this turnout based on the trend of banks’ preference to increase their lending to both their individual and corporate clients,” BSP Deputy Governor Diwa C. Guinigundo said in a text message to explain this week’s auction results.
“The 7-day TDF remains oversubscribed but fetched lower rates on account of the steady and limited offering of P40 billion plus the increased cash requirements for the long weekend,” the BSP official added, noting that the turnout for the 28-day tenor also reflected higher demand for loans and for additional liquidity ahead of another long weekend.
Financial markets including banks will be closed on Monday after Malacañang declared a public holiday for National Heroes’ Day. This is the second long weekend following the Aug. 21 commemoration of Ninoy Aquino Day.
Mr. Guinigundo said bank interest rates are increasingly becoming more market-oriented via the TDF, as the weekly auctions “reflect the fluidity of cash operations” of banks against the BSP’s liquidity forecasts which then determines the interbank rates at a given time.
For next week, the BSP decided to keep the auction volume steady at P180 billion, divided into P40 billion under the week-long term and P140 billion for the month-long tenor.