Rates down for favored short-term deposits

Preference for the short-dated term deposit facility (TDF) offered by the Bangko Sentral ng Pilipinas was sustained Wednesday with yields going down further.

For comparison, the longer tenor remained undersubscribed on higher rates.

For the P40 billion in seven-day TDF, tenders reached P40.836 billion, making the facility oversubscribed for the fourth straight week.

The yield for the one-week term deposits went down to the 3.28-3.35 percent range from 3.3-3.35 percent last week.

On the other hand, bids for the P140 billion in 28-day TDF amounted just P117.335 billion, which the BSP all awarded. The yield for the one-month facility further rose to 3.45-3.5 percent from 3.44-3.5 percent a week ago.

“We expect this turnout based on the trend of banks’ preference to increase their lending to both their individual and corporate clients,” BSP Deputy Governor Diwa C. Guinigundo told reporters.

“I wish to clarify that the results of the weekly auction should be appreciated in medium-term context because weekly auctions reflect the fluidity of cash operations of the banks against our liquidity forecasts. The BSP’s announcement of the periodic volume of offering should signal to the market our reading of monetary conditions that would, in turn, be an input to the price discovery process. The market response to such announcements will complete the loop and we should have a more active, more market-based auction for TDF,” Guinigundo added.

The BSP will again offer a total of P180 billion in TDF at next week’s auction.

Launched in June last year, the weekly TDF auctions form part of the interest rate corridor aimed at bringing market rates closer to the policy rate of 3 percent by mopping up excess liquidity. —BEN O. DE VERA