Term deposit auction yields mixed results

MANILA, Philippines - Seven-day term deposits fetched lower rates while the 28-day term deposit rates rose in the auction conducted by the Bangko Sentral ng Pilipinas (BSP) Wednesday.

BSP Deputy Governor Diwa Guinigundo said bid cover ratio for the seven-day term deposit facility (TDF) was higher at 1.8 versus last week’s 1.64, resulting in lower cut-off rate and weighted average interest rate at 3.0431 percent against last week’s 3.0465 percent.

On the other hand, for the 28-day TDF, weighted average interest rate rose from last week’s 3.3570 percent to 3.4101 percent following the slight decline in the bid to cover ratio of .979 from last week’s 1.147.

“We continue to see the broad impact of excess liquidity in the system and the interest of banks in short term instruments due to the so-called lack of clarity in the incoming leadership’s agenda in the US, Guinigundo said, commenting on the results.

He said the cut off rate was also up and the range of accepted bids also stretched wider.

“We do expect that as we increasingly migrate most of the overnight deposits to TDF’s we shall be able to gradually guide market rates closer to the BSP’s policy rate,” he also said.

BSP Governor Amando Tetangco Jr. for his part, said this week’s bidding behavior could be seen as resulting from uncertainty over risk events such as incoming US president Trump’s economic plans and Theresa May’s hard Brexit plan..

This, he said has made traders prefer shorter tenors.

“We will continue to monitor market appetite set against global developments as well as the developments in the local front, including the Bureau of the Treasury’s own auction program,” Tetangco said.