Banks shy away from 28-day term deposit facility
MANILA — A day after the government sold P70 billion in retail treasury bonds (RTBs) aimed at small investors, banks shied away from the term deposits offered by the Bangko Sentral ng Pilipinas on Wednesday, resulting in undersubscription for the 28-day tenor.
The seven-day term deposit facility (TDF) was nonetheless oversubscribed with P36.16 billion in tenders for the P30-billion offering.
The BSP sold the one-week TDF at a yield of between 2.9 percent and 3.1 percent, higher than the range of 2.9-3.007 percent last week.
However, bids for the P150 billion in 28-day term deposits fell short, totaling only P120.754 billion. It was the second straight week that the tenor was undersubscribed.
The accepted yield for the one-month facility was within the range of 3.25-3.5, up from last week’ range of 3.2-3.5 percent.
“The auction results of lower subscriptions and slightly higher rates are as expected given the availability of fresh supply from the national government in terms of the RTBs,” BSP Governor Amando M. Tetangco Jr. said in a text message to reporters.
The Bureau of the Treasury last Tuesday issued P70 billion in three-year retail treasury bonds at a coupon rate of 4.25 percent, higher than the 3.5 percent yield for the 10-year RTBs sold in September last year.
The auction for the government’s 19th RTB issuance generated P86.172 billion in tenders, almost triple the minimum offering of P30 billion.
“Banks are still looking towards shorter-dated instruments, and, as expected, will try to squeeze as much yield from alternative investment outlets. These are all part of market dynamics, which do not yet require any changes in the volumes of the BSP auction facilities,” Tetangco said.
On April 5 and 12, the BSP will still offer a total of P180 billion in term deposits—P30 billion in seven-day and P150 billion in 28-day.
“We’ll be monitoring liquidity levels against our forecast liquidity path. I think it’s important to provide some stability in the auction facilities of the BSP. The ultimate game plan is for banks to lend to the market for long term projects that will generate employment and increase wealth. The TDF is here to help steer interest rates and not to be an investment outlet,” according to Tetangco.
BSP Deputy Governor Diwa C. Guinigundo said “funds went to the RTBs, which fetched very attractive yields, and, as a result, the market went for the seven-day TDF for more flexible positioning.”
Also, “the market is anticipating further adjustments in the US Fed interest rate so longer-dated instruments are less preferred over the shorter-dated TDF,” Guinigundo added.
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. SFM
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