Term deposit rates ease further

MANILA, Philippines - Term deposit rates eased further as the Bangko Sentral ng Pilipinas (BSP) continued to maintain the volume of the term deposit facility (TDF) despite strong demand.

The yield of the seven-day term deposits during yesterday’s auction eased anew to 3.0103 percent from last week’s 3.0219 percent as accepted yield ranged from three to 3.02 percent.

On the other hand, the 28-day term deposits declined further to 3.4007 percent from 3.4106 percent as accepted rates ranged between 3.3 and 3.43 percent.

The auction at the TDFwas oversubscribed as bids for the P180 billion offering amounted to P255.11 billion as liquidity continued to return to the market.

Bids for the seven-day term deposits amounted to P51.07 billion for the P30-billion issuance while tenders for the 28-day term deposits amounted to P204.04 billion for the P150 billion offering.

BSP Governor Amando Tetangco Jr. said the auction committee decided to retain the current volume of P180 billion for the one a week auction until March 1.

“The TDFs remained choice instruments as markets continue to favor the short end of the curve. We kept the TDF auction size steady as these levels are still consistent with our liquidity forecast path,” Tetangco said.

Monetary authorities raised the volume of the facility to P180 billion last Dec. 1. This was the sixth time the volume was increased from the original size of P30 billion when the TDF was launched last June 8.

Earlier, BSP Deputy Governor Diwa Guinigundo said the weighted average interest rates would continue to come down gradually as the bid to coverage ratio for both the seven- and 28-day terms deposits would hover between 1.8 and 1.9 percent.

“We should be seeing the TDF rates as providing some benchmark for short term placements with the banks themselves. We also anticipate the interbank call loan rate starting to close in on the policy rate once the banks completely get the hang of term deposit auction,” he said.

Latest data from the BSP showed money supply grew 12.7 percent to P9.47 trillion in end-December from P8.43 trillion in end-December 2015 while bank loans increased by 17.4 percent to P6.3 trillion from P5.29 trillion.

The BSP launched the TDF as part of the shift to the interest rate corridor (IRC) system as one of the facilities to mop up excess liquidity in the financial system. The IRC aims to bring market rates closer to the policy rates.