Market swarms 7-day term deposits

MANILA, Philippines — Banks swarmed yesterday the term deposit auction facility (TDF) as the Bangko Sentral ng Pilipinas (BSP) continued to offer only short-dated term deposits due to the holiday season.

The yield of the seven-day term deposits slipped anew to 3.995 percent from 3.4004 percent last week with accepted yields ranging from 3.3 percent to 3.499 percent.

Bids for the shorter-dated term deposits reached P59.81 billion, higher than the issue size of P40 billion.

This was the second straight week the BSP auction committee did not offer 28-day term deposits.

The central bank has reduced the volume of the TDF five times since it was launched in June last year as part of the shift to the interest rate corridor (IRC) framework.

BSP Deputy Governor Diwa Guinigundo said banks have reserved some liquidity for any contingency during the holiday season.

“Naturally, they would prefer to go very short term as the banks continue to service their clients’ needs for loans, investment and even foreign exchange for imports, debt payments, and outward investments,” he said.

For next Wednesday’s auction, the BSP will only offer P40 billion worth of seven-day term deposits.

The BSP has been mopping up excess liquidity in the financial system as banks continued to lend more, buy foreign exchange for imports, debt servicing and foreign investments.

Liquidity in the financial system rose 14.8 percent to P10.26 trillion in end-October from P8.94 trillion in end-October last year while credit growth eased to 19.9 percent to P6.81 trillion from P5.68 trillion as banks continued to lend more to the productive sector.