Term deposits fetch lower rates

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) sees no need to recalibrate the term deposit facility (TDF) as term deposits continued to fetch lower yields amid strong demand.

BSP Governor Amando Tetangco Jr. said monetary authorities would continue to monitor liquidity in the financial system as it decided to maintain the volume of the TDF at P180 billion, comprising of P30 billion worth of seven-day term deposits and P150 billion worth of 28-day term deposits.

 “We will continue to monitor market liquidity preferences and use the info to assess effectiveness of auction sizes.  At the moment, however, we see no need to recalibrate the TDF,” he said.

The seven-day term deposits fetched a lower yield of 2.999 percent during yesterday’s auction from last week’s 3.0021percent as accepted yield ranged between 2.9 and 3.01 percent.

The yield of the longer dated 28-day term deposits declined further to 3.3883 percent from 3.3929 percent as accepted rates ranged from 3.25 to 3.4 percent.

 “Good demand for short dated TDF placements continued to be seen, with tenders higher than last week and rates continuing to inch down,” Tetangco said.

The facility was oversubscribed as bids for the P180 billion offering amounted to P55.36 billion as liquidity continued to return to the market.

The BSP chief pointed out there are more TDF placements ahead of the meeting of the US Federal Open Market Committee (FOMC) in the middle of the month.

Bids for the seven-day term deposits amounted to P45.94 billion for the P30-billion issuance while tenders for the 28-day term deposits amounted to P209.42 billion for the P150 billion offering.

“Our market go around suggests the bid to cover ratio for seven-day tenor is higher ahead of the US FOMC Meeting on March 15 and 16. Some are preparing for corporate bond issuances in the pipeline this March. They want to stay at shorter tenor,” he said.

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.