Term deposit rates steady

MANILA, Philippines - Term deposit rates moved sideways yesterday as banks anticipate a higher demand for cash ahead of the long weekend as well as higher lending, the Bangko Sentral ng Pilipinas (BSP) said.

The seven-day term deposits fetched a lower rate of 3.3124 percent from last week’s 3.3241 percent with the accepted yield ranging between 3.28 and 3.35 percent.

On the other hand, the yield of the 28-day term deposits was unchanged at 3.4958 percent as accepted rates ranged from 3.45 to 3.5 percent.

The shorter-dated term deposits was slightly oversubscribed with tenders reaching P40.84 billion for a bid coverage ratio of 1.0209 percent while the longer-dated term deposits remained undersubscribed as bids for the P140-billion offering amounted to P117.33 billion for a bid coverage ratio of 0.8381 percent.

BSP Deputy Governor Diwa Guinigundo said the turnout was expected based on the trend of banks’ preference to increase their lending to both their individual and corporate clients.

He explained the seven-day term deposits remain oversubscribed but fetched lower rates on account of the steady and limited offering of P40 billion plus the increased cash requirements for the long weekend.

Likewise, he added the 28-day term deposits have higher subscription but still lower than the offering of P140 billion but the rate was steady at 3.4958 percent on account of higher demand for loans and the long weekend as well.

Malacañang has declared Aug. 21 and 28 as holidays in celebration of the Ninoy Aquino day and National Heroes’ day, respectively.

“I wish to clarify that the results of the weekly auction should be appreciated in medium term context because weekly auctions reflect the fluidity of cash operations of the banks against our liquidity forecasts,” he said.

Guinigundo said the BSP’s announcement of the periodic volume of offering should signal to the market the central bank’s reading of monetary conditions that would in turn be an input to the price discovery process.

The BSP auction committee decided to retain the volume of the facility at P180 billion on Aug. 30 consisting of P40 billion worth of seven-day term deposits and P140 billion worth of 28-day term deposits.

“The market response to such announcements will complete the loop and we should have a more active, more market based auction for TDF,” he said.

The TDF serves as the main tool for absorbing liquidity and promotes the establishment of benchmarks for short-term interest rates. It was launched as part of the interest rate corridor (IRC) system aimed at bringing market rates closer to the policy rates.