Term deposit rates fall on oversubscription

MANILA, Philippines — Term deposit rates fell across the board as banks, armed with excessive funds due to strong inflows, continued to swarm the term deposit auction facility (TDF).

The seven-day tenor fetched a lower yield of 5.0342 percent yesterday from last week’s 5.1027 percent, while the yield of the 14-day term deposits eased 2.09 basis points to 5.1452 percent from 5.1661 percent.

Likewise, the yield of the 28-day tenor declined by 2.59 basis points to 5.1758 percent from 5.2017 percent.

The weekly auction was oversubscribed as bid across tenors reached P95.03 billion or almost double the issue size of P50 billion.

Bids for the P20-billion seven-day term deposits reached P42.28 billion, while the tenders for the 14-day tenor amounted to P33.52 billion versus the P20 billion offering.

Likewise, the 28-day tenor was oversubscribed as tenders amounted to P19.23 billion versus the offer size of P10 billion.

Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said banks continued to park excess funds in the liquidity absorption facility due to strong inflows from higher foreign direct investments (FDIs) and foreign portfolio investments.

There is strong demand for term deposits despite the ongoing retail treasury bond (RTB) offering of the Bureau of the Treasury where it initially raised almost P114 billion.

 “Indeed, there were huge oversubscriptions across the three tenors especially for the seven-day TDF. While BTr absorbed enormous liquidity through its RTB, part of such liquidity deposited with the BSP is withdrawn and continuously funds debt servicing, payment to suppliers and normal government operations,” Guinigundo said.

Guinigundo said the financial system remains liquid and the increasing surplus of banks would continue to find its way to BSP facilities including the TDF.

Inflation continued to ease, hitting an 11-month low of 3.8 percent in February from 4.4 percent in January due to lower food prices. The consumer price index declined steadily after peaking at 6.7 percent in September and October.

Inflation accelerated to 5.2 percent last year from 2.9 percent in 2017 and exceeded the BSP’s two to four percent target due to elevated oil and food prices as well as weak peso.