Term deposit rates on strong investor demand

MANILA, Philippines — Term deposit rates eased across the board yesterday as banks continued to park their excess funds in the liquidity absorption facilities of the Bangko Sentral ng Pilipinas (BSP).

The yield of the seven-day term deposits shed 0.68 basis points to 5.0638 percent from 5.0706 percent last week, while the rate of the 14-day tenor retreated 2.4 basis points to 5.1290 percent from 5.1530 percent.

Likewise, the 28-day term deposits fetched a lower rate of 5.1339 percent at the term deposit auction facility (TDF) from last week’s 5.1694 percent.

The liquidity absorption facility was oversubscribed as tenders amounted to P59.78 billion versus the volume of P50 billion.

The seven-day tenor was oversubscribed with bids reaching P29.74 billion as against the offer size of P20 billion, while the P10-billion 28-day offering was also oversubscribed as tenders amounted to P12.72 billion.

On the other hand, the 14-day tenor was undersubscribed as bids amounted to P17.32 billion and fell short of the P20-billion issue size.

BSP Deputy Governor Diwa Guinigundo said the TDF has been oversubscribed since the start of the year as liquidity continued to return in the financial system after the long holidays.

“After a seemingly tight liquidity condition given the undersubscription during the holidays, we saw large oversubscription right after New Year as funds withdrawn during Christmas and New Year began to return to the banks themselves. With excess funds, the banks placed more deposits with the BSP,” he said.

According to Guinigundo, oversubscriptions would be reduced in the coming weeks as excess funds have been siphoned off by the central bank facilities as well as the fund raising activity by the national government through the Bureau of Treasury (BTr).

“In the next few weeks, as more and more funds are invested in TDF’s, there would be less and less oversubscriptions. On top of that, BTr has also been quite aggressive in frontloading its domestic borrowing early in the year,” Guinigundo said.