Term deposit yields up further

MANILA, Philippines — Term deposit rates rose further as preference shifted to the longer tenor as cash-rich banks continued to park excess funds in the liquidity absorption facility, according to the Bangko Sentral ng Pilipinas.

BSP Deputy Governor Francisco Dakila Jr. said the yield of the seven-day tenor increased by 1.673 basis points to 1.954 percent at the Term Deposit Facility (TDF) auction yesterday from 1.9373 percent last week.

Dakila said the 14-day term deposits fetched 2.0454 percent or 1.165 basis points higher than last week’s 2.0337 percent.

“The overall results of the TDF auction show that liquidity in the financial system remains ample. The BSP will remain guided by its assessment of market developments and liquidity conditions in the conduct of its monetary operations going forward,” he said.

There was no volume offered in the 28-day term deposits for the fourth straight week as the central bank continues to auction 28-day BSP securities every Friday.

Dakila said tenders for both tenors amounted to P593.99 billion, higher than the P490 billion offering.

The seven-day tenor was undersubscribed as banks only tendered P189.03 billion versus the P220 billion offering.

On the other hand, bid for the 14-day term deposits amounted to P404.95 billion or 1.5 times the issue size of P270 billion.

“There was a notable shift of preference to the longer tenor as the seven-day TDF was undersubscribed,” Dakila said.

The BSP has been doing the heavy lifting to soften the blow of the COVID-19 pandemic on the economy, helping unleash P1.9 trillion into the financial system.

The COVID-19 response measures of the BSP to keep the economy afloat include the 175-basis points cuts in interest rates, the lowering of reserve requirement ratios for banks, the P540 billion provisional advance to the national government, the P300 billion repurchase agreement with the Bureau of the Treasury settled last September, and the purchase of government securities in the secondary market.

The central bank’s Monetary Board is seen extending the prudential pause by keeping interest rates steady for the rest of the year amid the benign inflation environment.