Term deposit rates ease further

MANILA, Philippines - Term deposits continued to fetch lower rates amid the uncertainties brought about by the impending interest rate increases in the US, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The seven-day term deposits fetched a lower yield of 3.0021 percent during yesterday’s auction from last week’s 3.0103 percent as accepted yield ranged between 2.9 and 3.02 percent.

The yield of the longer dated 28-day term deposits declined further to 3.3929 percent from 3.4007 percent last year as accepted rates ranged from 3.3 to 3.425 percent.

BSP Governor Amando Tetangco Jr. said there is still good demand for short-dated term deposit placements amid the lower bid cover ratios.

The auction at the term deposit facility (TDF) was oversubscribed as bids for the P180 billion offering amounted to P209.18 billion as liquidity continued to return to the market.

“There continues to be oversubscription and the rates were still on a downtrend. The liquidity in the system remains healthy,” he said.

Bids for the seven-day term deposits yesterday amounted to P37.87 billion for the P30-billion issuance translating to a bid cover ratio of 1.2625 percent while tenders for the 28-day term deposits amounted to P171.3 billion for the P150 billion offering for a cover ratio of 1.142 percent.

“The auction results show there is still good demand for short-dated TDF placements for both seven and 28 days even as the bid to cover ratios are lower than last week’s,” Tetangco said.

The BSP has decided to maintain the volume of the TDF action at P180 billion, comprising of P30 billion for seven-day and P150 billion for 28-day term deposits, until March 8.

The volume of the facility has been raised six times from the original size of P30 billion when the TDF was launched last June 8.

“Investors remain on the look out for short dated paper with good yields,” Tetangco 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.