Yield of 28-day term deposit rises

MANILA, Philippines – The yield of the longer-dated term deposits continued to rise as the Bangko Sentral ng Pilipinas (BSP) decided to raise the auction volume starting next week amid strong demand from banks and trust entities.

Bids for the seven-day term deposits reached P34.02 billion, while tenders for the 28-day term deposits amounted to P172 billion yesterday. The BSP made a full award of P10 billion for the seven-day term deposits and P80 billion for the 28-day term deposits.

The seven-day term deposits fetched 2.5 percent, while the yield for the longer 28-day term deposits rose further to 2.5438 percent yesterday from last week’s 2.528 percent as accepted yield ranged between 2.5 and 2.5625 percent.

The yield of 28-day term deposits continued to pick up amid strong demand from banks and trust entities.

Last week, the BSP decided to raise the volume of the term deposit facility (TDF) to P110 billion starting Oct. 5 from the current size of P90 billion.

The size of the 28-day term deposits being auctioned every Wednesday will increase to P100 billion starting next month from the current P80 billion while that of the seven-day term deposits was retained at P10 billion.

BSP Governor Amando Tetangco Jr. earlier said the increase in the 28-day auction is part of the auction refinement program.

“The adjustment has been for the longer tenor so far because that is where we find greater market appetite for now,” Tetangco said.

This was the fourth time the BSP has raised the volume of the TDF since it was launched last June 8 with an original volume of P30 billion as part of the shift to the interest rate corridor (IRC) system.

The volume was increased to P50 billion in July, to P70 billion last Aug. 3, to P90 billion last Aug. 31, and to P110 billion starting Oct. 5.

Last June 3, the BSP implemented an operational adjustment reducing the overnight lending rate (formerly overnight borrowing rate) to 3.5 percent from six percent as well as the overnight reverse repurchase rate (formerly overnight lending rate) to three percent from four percent.

The yield of the overnight deposit facility (ODF) was retained at 2.5 percent. The interest rates for the standing liquidity facilities form the upper and lower bound of the corridor, while the overnight reverse repurchase is set at the middle of the corridor.