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Yields on BSP’s term deposits decline despite lower demand

YIELDS ON term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) on Wednesday continued to inch lower as demand normalized after the holidays.

Demand for the BSP’s term deposit facility (TDF) amounted to P726.615 billion on Wednesday, well above the P550 billion on the auction block but lower than the P867.292 billion in bids seen a week ago.

Broken down, bids for the one-week papers reached P305.273 billion yesterday, surpassing the P200-billion offering but falling below the P380.918 billion in demand seen on Jan. 6.

Banks asked for rates ranging from 1.6% to 1.67%, a lower band compared with the 1.6105% to 1.7% yield margin last week. This caused the seven-day paper’s average rate to settle at 1.647%, falling by 2.65 basis points (bps) from the 1.6735% in the previous auction.

For the 14-day papers, tenders amounted to P421.342 billion, higher than the P350 billion auctioned off by the central bank but declining from the P486.374 billion worth of bids recorded a week ago.

Accepted rates for the two-week term deposits were from 1.6% to 1.7%, slightly lower than the 1.6125% to 1.7125% band seen last week. With this, the tenor’s average rate went down 1.46 bps to 1.6673% from 1.6819% previously.   

The BSP did not auction off 28-day term deposits for the 13th consecutive week. This follows the start of its weekly offerings of short-term bills with the same maturity.

The TDF and BSP securities are tools used by the central bank to mop up excess liquidity in the financial system and to better guide market interest rates.

“The results in the TDF auction continue to reflect ample liquidity in the financial system. Looking ahead, the BSP’s monetary operations will remain guided by its assessment of liquidity conditions and market developments,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement on Wednesday.

BSP Governor Benjamin E. Diokno has said the central bank’s various moves to boost liquidity have infused about P2 trillion in cash into the financial system.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the demand for term deposits stabilized after the spike seen last week.

“Short-term interest rates also continued to ease in view of the end of the window-dressing and other balance sheet management for the accounting year end,” Mr. Ricafort said in a text message. — Luz Wendy T. Noble

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