Term deposit yields decline

MANILA, Philippines - Term deposits fetched lower yields yesterday as trust entities continued to stay away from the term deposit facility (TDF) as mandated by the Bangko Sentral ng Pilipinas (BSP).

The seven-day term deposits fetched a lower rate of 3.1918 percent yesterday from 3.2468 percent last week as accepted yield ranged between three and 3.23 percent.

On the other hand, the yield of the 28-day term deposits slightly declined to 3.476 percent from 3.4764 percent as accepted rates ranged from 3.35 to 3.5 percent.

The short-dated seven-day term deposits attracted P68.56 billion in bids and the auction committee made a full award of P40 billion for a bid coverage ratio of 1.7141 percent.

The 28-day term deposits remained undersubscribed as tenders only amounted to P111.13 billion for a bid coverage ratio of 0.7938 percent.

The BSP is set to auction P40 billion worth of seven-day term deposits and P140 billion worth of 28-day term deposits on May 31.

BSP Governor Amando Tetangco Jr. told reporters there is sufficient liquidity in the financial system but investors continued to pick up shorter-dated term deposits.

“There continues to be sufficient liquidity in the system particularly for the seven-day tenor which was oversubscribed again. So there continues to be strong interest in the short end of the curve,” he said.

Tetangco said the 28-day term deposits remained undersubscribed as trust entities continued to unwind their term deposit holdings.

“On the 28-day, the interest rate was basically flat relative to last week. I think it was also undersubscribed again and factors behind this is the unwinding by the trust departments of their placements in the TDF,” he said.

The BSP has given trust entities until July this year to unwind their exposures in the TDF and overnight deposit facility (ODF).

Furthermore, the outgoing BSP chief pointed out banks continued to lend more to corporate clients while some shifted their funds to private issuances.

“With the increased lending by the banks to their corporate clients and there were private issues prior to this auction. So some of the funds went to those issues as well,” he said.

According to him, monetary authorities would continue to monitor if there would be a need to adjust the terms of the TDF auction at some point.