Term deposit rates mixed

MANILA, Philippines — Interest rates on term deposits were mixed yesterday as banks opted for short-term positions pending the results of the rate-setting meetings of the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve.

The yield on the seven-day term deposits slipped to 3.1768 percent yesterday from last week’s 3.1893 percent due to strong demand. The accepted yields for the short-term term deposits ranged from 3.125 to 3.2 percent.

On the other hand, both the 14- and 28-day term deposits fetched higher rates at the term deposit auction facility.

The 14-day tenor fetched a higher rate of 3.2451 percent from last week’s 3.2404 percent, while the yield of the 28-day term deposits rose to 3.3416 percent from 3.3274 percent.

Yesterday’s P110 billion offering remained oversubscribed with bids reaching P128.12 billion even if both 14- and 28-day tenors were undersubscribed as banks placed bulk of their excess funds on the seven-day term deposits.

Bids for the seven-day term deposits amounted to P72.29 billion and the BSP auction committee made a full award of P50 billion.

The 14-day term deposits were undersubscribed as bids for the P40 billion offering only reached P35.95 billion, while bids for the 28-day tenor amounted to P19.96 billion, slightly lower than the P20 billion issue size.

About P90 billion worth of additional liquidity was released into the financial system early this month after the BSP decided to finally reduce the ultra high level of deposits that needs to be kept by banks with the central bank to 19 percent from 20 percent.

The reduction in the reserve requirement ratio took effect March 2 and marked the beginning of the gradual lowering as BSP Governor Nestor Espenilla Jr. voiced his intention to bring down the level to single digits.

The additional money supply released into the system was easily absorbed by BSP facilities led by the TDF as volume was raised to P110 billion with the reintroduction of the 28-day tenor and the launch of the 14-day term deposits from only P40 billion at the start of the year.