Banks devour short term deposit offer

Banks once more swarmed the Bangko Sentral ng Pilipinas’ term deposit facility (TDF) auction Wednesday, with the market showing appetite for shorter tenors.

Tenders for the P150 billion in 28-day term deposits reached a total of P204.045 billion. The accepted yield for the one-month facility was within the 3.3 percent and 3.43 percent range.

The seven-day TDF facility was also oversubscribed, with P51.07 billion tendered for the P30-billion offering. The BSP accepted bids for the one-week facility at the 3 percent and 3.02 percent yield.

“The TDFs remained choice instruments as markets continue to favor the short end of the curve,” BSP Governor Amando M. Tetangco Jr. told reporters in a text message.

The BSP will again offer a total of P180 billion in term deposits—P30 billion in seven-day and P150 billion in 28-day—each on Feb. 22 and March 1.

“We kept the TDF auction size steady as these levels are still consistent with our liquidity forecast path,” Tetangco said.

Launched in June last year, the weekly TDF auctions form part of the implementation of the BSP’s interest rate corridor, aimed at bringing market rates closer to the policy rate of 3 percent. The TDF auctions mop up excess liquidity in the system.

The overnight lending facility—the upper bound of the corridor—was cut to 3.5 percent from the former repurchase (RP) facility of 6 percent, while the policy rate or reverse repurchase (RRP) facility had been converted into overnight, with its rate cut to 3 percent from the previous RRP facility of 4 percent.