Term deposit rates up on oversubscription

MANILA, Philippines — Term deposits fetched higher rates across the board as banks continued to park their excess funds in the liquidity absorption facilities of the Bangko Sentral ng Pilipinas (BSP).

BSP Deputy Governor Diwa Guinigundo said domestic liquidity remains ample as banks continued to swarm the weekly term deposit auction facility (TDF).

“This is clearly shown by the oversubscriptions across all tenors. Liquidity obviously derived from sustained reflow to the banks after the long holiday season and the sustained disbursement by the national government including its infra executing departments,” he said.

The central bank’s liquidity absorption facility was oversubscribed yesterday with tenders for the three tenors reaching P68.09 billion versus the issue size of P50 billion

Tenders for the P20-billion seven-day term deposits reached P28.08 billion as banks swarmed the shorter-dated tenor, while the bids for the 14-day tenor reached P27.26 billion versus the P20 billion offering.

Likewise, the 28-day tenor was oversubscribed as bids amounted to P12.75 billion versus the offer size of P10 billion.

Guinigundo said liquidity remains ample amid the plan of the Bureau of Treasury (BTr) to issue retail treasury bonds (RTBs) to cover the maturing debt of the national government.

“The market should understand that timing should be considered when observing monetary conditions. At the first instance, the market may appear low on liquidity after the BTr completes one funding exercise. The proceeds of this actually go to the BSP as national government depository,” he said.

According to Guinigundo, the same liquidity goes back to the system and re-deposited with the banks and placed in the BSP’s liquidity absorption facilities once the Department of Budget and Management (DBM) approved the disbursement of public funds for infrastructure projects.

“There will be more permanent reduction in system liquidity if the BSP starts selling foreign exchange to the market and keeps the proceeds, reflecting negative market sentiment and leading to some sustained capital outflow. This is clearly not the case today,” he said.

The yield of the seven-day tenor inched up 1.54 basis points to 5.1565 percent yesterday from 5.1411 percent last week, while the 14-day term deposits fetched a higher rate of 5.1828 percent from 5.1765 percent.

Likewise, the 28-day term deposits booked a higher yield of 5.1839 percent from last week’s 5.1788 percent.