Market still prefers 7-day IOUs

Banks snapped the seven-day term deposits offered by the Bangko Sentral ng Pilipinas yesterday while the 28-day facility remained under subscribed for the 10th consecutive week.

For the seven-day term deposit facility (TDF), tenders hit P68.564 billion for the P40-billion offering.

The BSP accepted the offers at a yield of between 3 and 3.23 percent, up from last week’s 2.6-3.275 percent.

Bids for the P140-billion 28-day TDF amounted to only P111.128 billion, which were accepted by the BSP.

The yield for the 28-day TDF was 3.35-3.5 percent, down from 3.375-3.5 percent last week.

“There continues to be sufficient liquidity in the system, particularly for the seven-day tenor which was oversubscribed again. So there continues to be strong interest in the short end of the curve,” BSP Governor Amando M. Tetangco Jr. told reporters on the sidelines of the special testimonial luncheon held in his honor by seven local and foreign business groups.

“On the 28-day, the interest rate was basically flat relative to last week and it was undersubscribed again. Factors behind this would be the unwinding by the trust departments of their placements in the TDF, increased lending by banks to their corporate clients, and also there were private issues prior to this auction so some of the funds went to those issues as well,” Tetangco said.
“We will continue to monitor this and see if there will be a need to adjust at some point. But right now, the auction amounts are still appropriate,” according to Tetangco.

The BSP will also offer P180 billion in TDF next Wednesday, even as it raised early this month the volume for the seven-day facility from P30 billion while lowering that for the 28-day from P150 billion.

Launched in June last year, the weekly TDF auctions form part of the BSP’s implementation of the IRC to bring market rates closer to the policy rate of 3 percent by mopping up excess liquidity.