Banks snap 7-day term deposits, shun 28-day ahead of expected Fed rate hike

Ahead of an anticipated rate hike by the US Federal Reserve Thursday Manila time, banks snapped the Bangko Sentral ng Pilipinas’ seven-day term deposit facility (TDF) offered Wednesday while the 28-day tenor remained undersubscribed for the 13th consecutive week.

The seven-day TDF was oversubscribed as P64.74 billion were tendered for the P40-billion offering.

The BSP accepted the seven-day facility at a yield of between 2.9 percent and 3.1 percent.

Meanwhile, bids for the P140-billion 28-day TDF reached only P95.672 billion, from which the BSP accepted P95.272 billion.

The accepted yield for the 28-day facility was within the range of 3.4-3.5 percent.

“The auction results show banks’ continued preference to stay at the shorter end of the curve in anticipation of the Fed meeting this week, with the oversubscription of the seven-day term deposits,” BSP Gov. Amando M. Tetangco Jr. said in a text message to reporters.

“Demand for the 28-day term deposits, however, decreased due to the non-participation of trust units as the June 30 deadline nears,” Tetangco added.

Last year, the Monetary Board, the BSP’s highest policymaking body, decided to discontinue trust entities’ placements in the TDF beginning July this year.

According to Tetangco, “overall system liquidity appears adequate.”

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