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Yields on term deposits flat on muted demand

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The facade of Bangko Sentral ng Pilipinas (BSP) in Roxas Boulevard, Manila is seen in this photo taken on September 21, 2014. — BW FILE PHOTO

By Melissa Luz T. Lopez,
Senior Reporter

YIELDS stood steady amid pale demand during the central bank’s auction of term deposits yesterday, with bids failing to fill the reduced auction size for the third straight week.

Total tenders received under the term deposit facility (TDF) yesterday totalled P104.045 billion, slumping from the P139.271 billion which banks wanted to place under the watch of the Bangko Sentral ng Pilipinas (BSP) as both the week-long and month-long tenors saw thin demand.

Bids for the seven-day instruments settled at just P36.89 billion, slipping further from the P37.829 billion in offers seen the previous week to settle below the P40 billion which the central bank placed on the auction block.

In turn, market players sought higher returns for placing their extra cash under the facility as they asked for an average 3.3765% yield, inching up from the past week’s 3.3484%.

Demand for the 28-day term deposits also slumped to P67.155 billion or nearly half the P110 billion that the BSP wanted to sell, dropping from P101.442 billion worth of offers seen a week ago. Weak market appetite for the longer-termed papers kept the average rate steady at 3.496%, barely changed from 3.495% tallied during the Sept. 13 auction.

The TDF is currently the central bank’s main tool to arrest excess money supply in the financial system, where banks can park idle funds — or those which are not deployed for loans or reserves — in exchange for a small return.

This week also marks the third week that the BSP auctioned off P150 billion in term deposits, lower than the P180 billion they offered over the past nine months.

Sought for comment, BSP Deputy Governor Diwa C. Guinigundo said banks may have chosen to hold on to more funds this week ahead of the cancellation of work in government offices and in public schools on Thursday to mark the 45th anniversary of martial law under former President and dictator Ferdinand E. Marcos.

“Suspension of work appears to be the reason for the banks to keep funds with them. Of course they continue to lend out, invest, etc.,” Mr. Guinigundo said in a text message.

For its part, the BSP said the clearing and settlement operations will continue despite Malacañang’s declaration, and will also push through with its monetary policy review scheduled today. The Bankers Association of the Philippines also said separately that all its member banks will also remain open.

Mr. Guinigundo said earlier this month that the BSP is studying whether it was viable to introduce new tenors for the TDF, but noted that such plan is being considered carefully so as not to crowd out demand for the 91-day debt papers auctioned by the Bureau of the Treasury.

Next week, the BSP will again try to sell P150 billion worth of term deposits, split between the P40 billion under the seven-day tenor and P110 billion in 28-day papers.