Excess liquidity pulls down term deposits

MANILA, Philippines — Term deposit rates slipped further as banks continued to place excess funds in the central bank’s liquidity absorption facility, according to the Bangko Sentral ng Pilipinas (BSP).

BSP Deputy Governor Francisco Dakila Jr. said the weighted average interest rates for the seven- and 14-day term deposits continued to decline.

The yield of the seven-day tenor slipped by 1.959 basis points to 1.7541 percent at the term deposit facility (TDF) auction by the BSP yesterday from last week’s 1.7737 percent.

Likewise, the 14-day term deposits fell by 2.364 basis points to 1.786 percent from 1.8097 percent.

Dakila said the yields accepted in the seven-day tenor remained low and further narrowed to a range of 1.7 to 1.7715 percent while that of the 14-day term deposits shifted lower but wider at 1.725 to 1.8 percent.

“The TDF auction results continue to show normal market conditions amid ample liquidity in the financial system. Looking ahead, the BSP’s monetary operations will remain guided by its latest assessment of liquidity conditions and market developments,” Dakila said.

Both tenors were oversubscribed given ample liquidity in the financial system, with tenders hitting P582.77 billion versus the P490 billion offering.

Bids for the seven-day tenor amounted to P179.14 billion versus the P140-billion volume, while tenders for the 14-day term deposits reached P403.63 billion against the P350-billion offering.

The government imposed a stricter lockdown as COVID-19 infections now near one million with over 16,000 deaths. It placed the National Capital Region and adjacent provinces under enhanced community quarantine from March 29 to April 11 and under modified enhanced community quarantine from April 12 to 30.

The BSP has maintained an accommodative stance to help the economy from the pandemic-induced recession as the country’s gross domestic product (GDP) contracted by a record 9.6 percent last year, ending 21 years of positive growth.

BSP Governor Benjamin Diokno said in a webinar hosted by the Asia Development Bank Institute (ADBI) the country’s GDP is likely to grow by six to seven percent instead of the 6.5 to 7.5 percent set by the Development Budget Coordination Committee (DBCC).