Banks still go for seven-day term deposit facility—BSP

Banks continued to prefer the short-dated term deposit facility (TDF) auctioned off by the Bangko Sentral ng Pilipinas (BSP) Wednesday while the longer tenor remained undersubscribed.

For the P40 billion in seven-day TDF, tenders reached P60.818 billion, such that the facility was oversubscribed for the second straight week.

The accepted yield for the one-week term deposits further increased to 3.3 to 3.375 percent from 3.25 to 3.4 percent last week.

But bids for the P140-billion 28-day facility amounted just P119.356 billion, which the BSP all awarded.

The yield for the one-month TDF still ranged within 3.425-3.5 percent, the same as last week’s range.

Last week, BSP Deputy Governor Diwa C. Guinigundo said the oversubscribed seven-day and undersubscribed 28-day TDF were “very much expected as the transitory factors that led to heavy undersubscriptions have receded,” referring to the auctions last month.

“Trust funds that have been withdrawn from the BSP are finally going back as bank funds. The national government has completed its retail treasury bond (RTB) issue, and the exchange rate appears stabilizing that banks have little incentive to buy more foreign exchange. So banks have higher demand for new options, including placement with the BSP’s TDF,” Guinigundo said.

To recall, the peso slid to nearly 11-year lows from late June to July, while the government also sold over P181 billion in RTBs from March to April.

“Undersubscriptions are always relative to the auction volume that has been maintained for some time now. Since there were alternative uses for their funds, the banks shifted to more lending, more forex purchases and more RTB placements resulting in some undersubscriptions. But the system remains liquid,” according to Guinigundo.

Next week, the BSP will again offer term deposits totaling P180 billion.

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.