Banks choose safer 7-day term deposits on foreseeable Fed rate hike
Ahead of an anticipated rate hike by the US Federal Reserve, banks snapped the Bangko Sentral ng Pilipinas’ (BSP) 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 banks tendered P64.74 billion for the P40-billion offering.
The BSP accepted the bids for the seven-day facility at a yield between 2.9 percent and 3.1 percent.
On the other hand, bids for the P140-billion 28-day TDF reached only P95.672 billion. The BSP accepted only P95.272 billion.
The accepted yield for the longer tenor 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 Governor Amando M. Tetangco Jr. said in a text message to reporters.
Markets around the world moved to the sidelines, awaiting what would be in store as the US Fed was expected to raise benchmark rates at the end of its two-day p0licy meeting Thursday (Manila time).
“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.
The Monetary Board, the BSP’s highest policymaking body, had decided last year to discontinue trust entities’ placements in the TDF beginning July this year.
According to Tetangco, this was because the “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.
