Term deposit rates fetch mixed results

MANILA, Philippines — Term deposits fetched mixed results yesterday as rates for the seven and 14-day tenors climbed, while the yield for the 28-day slipped slightly as the Bangko Sentral ng Pilipinas (BSP) decided to take a prudent pause by keeping interest rates unchanged last week.

The rate for the seven-day term deposits inched up by 1.1 basis points to 4.2374 percent at the term deposit auction facility (TDF) yesterday from last week’s 4.2264 percent, while the 14-day term deposits yield went up by 3.49 basis points to 4.3533 percent from 4.3184 percent.

On the other hand, the 28-day term deposits fetched 4.3592 percent yesterday or slightly lower than last week’s 4.3597 percent.

Banks continued to park their excess funds in the liquidity absorption facility despite the increase in the volume to P150 billion this week as tenders amounted to P171.97 billion.

Both the 14 and 28-day term deposits were oversubscribed as bids exceeded the issue size of P50 billion for each tenor.

The seven-day tenor was oversubscribed as bids only amounted to P63.72 billion, while tenders for the 28-day term deposits reached P60.79 billion.

On the other hand, the 14-day tenor was undersubscribed as bids hit P47.46 billion or slightly lower than the P50 billion volume.          

Last Thursday, the decided to keep interest rates unchanged to allow previous monetary actions including the 75 basis points rate cuts since the start of the year filter its way into the economy.

The BSP has been raising the volume of the liquidity absorption facility as the 100 basis point reduction in the reserve requirement ratio for big and mid-sized banks is set to take effect in the first week of December.

The BSP has lowered the RRR for universal, commercial, and thrift banks by 400 basis points and for small banks by 200 basis points this year to free up much needed funds to boost economic activity.

The BSP has so far lowered the RRR by 600 basis points since last year as part of the commitment former BSP governor Nestor Espenilla Jr. to bring down the ultrahigh RRR to single digit by 2023.

Aside from lowering the intermediation costs, the RRR reductions allow banks to release more funds into the economy to boost economic activity.