Term deposit rates ease ahead of Monetary Board meeting

MANILA, Philippines — Term deposit rates eased further across the board ahead of the last rate-setting meeting of the Monetary Board for the year as banks continued to take short-term positions due to the Christmas holidays, according to the Bangko Sentral ng Pilipinas.

BSP Deputy Governor Francisco Dakila Jr. said the yield of the seven-day tenor eased by 1.72 basis points to 1.7046 percent at the term deposit facility (TDF) auction yesterday from last week’s 1.7218 percent.

Likewise, the 14-day term deposits fetched 1.7163 percent, 0.286- basis-point lower than last week’s 1.7191 percent.

Dakila said the range of accepted yields narrowed relative to last week at 1.650 to 1.730 percent for the seven-day TDF, but widened to a range of 1.650 to 1.760 percent for the 14-day TDF.

“The auction results reflect market participant’s continued preference for the shorter tenor in view of the holidays. At the same time, financial system liquidity remains ample,” he said.

There was no volume offered in the 28-day term deposits for the past 10 weeks as the central bank continues to auction the 28-day BSP securities every Friday.

Cash-rich banks continued to park funds at the TDF with bids for both tenors reaching P588.33 billion versus the higher P510 billion offering.

Tenders of the seven-day term deposits reached P235.87 billion versus the P170 billion offering, while that of the 14-day tenor was undersubscribed as bids reached only P334.46 billion versus the increased volume of P340 billion.

“The BSP’s monetary operations will remain guided by its assessment of market developments and liquidity conditions moving forward,” Dakila said.

The BSP has been doing the heavy lifting to soften the blow of the 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 200-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 Sept. 29, the purchase of government securities in the secondary market, among others.

The Monetary Board is widely expected to keep the benchmark interest rate at an all-time low of two percent on Thursday.