Risk-averse banks go for short-term deposits

Banks snapped up shorter term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) Wednesday, maintaining a cautious stance ahead of a key market development in the US.

“Ahead of the Federal Open Market Committee (FOMC) meeting tonight [Wednesday night, Manila time], there is market preference for the shorter tenor, even as it is widely expected that the Fed will keep rates steady,” BSP Governor Amando M. Tetancgo Jr. said in a text message to reporters.

Banks tendered a total of P59.172 billion or almost double the P30-billion offering for the BSP’s seven-day term deposit facility (TDF). The BSP fully awarded the seven-day term deposits at the 3-3.05 percent yield range.

For the 28-day TDF, bids reached P181.291 billion, exceeding the P150 billion offered. The BSP accepted tenders at the 3.3-3.47 percent yield.

The TDF auctions mop up excess liquidity in the system.

“Just like the market, we will look out for the Fed’s assessment of labor conditions and outlook on inflation. We will take any relevant information into consideration in our own assessment of domestic inflation dynamics at our policy meeting next week,” Tetangco said. The Monetary Board, the BSP’s highest policymaking body, will meet to discuss its monetary policy on Feb. 9.

The policy-setting and market-moving FOMC unanimously voted to raise the key federal funds rate to the 0.5-0.75 percent range last year. US Fed officials expect three more hikes to bring the rate up to 1.4 percent by end-2017 in order to match upward inflationary pressures caused by US President Donald Trump’s higher infrastructure spending and tax program.

At the Bureau of the Treasury Tuesday, all P6 billion in 91-day IOUs were awarded at an average annual rate of 1.998 percent. Tenders for the three-month T-bills maturing on May 3 reached P8.86 billion.

For the 182-day debt paper, the Treasury accepted only P3.935 billion out of the P5-billion offering at an average rate of 2.252 percent. Bids for the six-month treasury bills maturing on Aug. 2 totaled P5.685 billion.

For the 364-day government securities, only P1.367 billion were awarded at an annual rate of 2.571 percent, as the auction was undersubscribed. Investors tendered a total of P3.517 billion, short of the P4-billion offering. —BEN O. DE VERA