Term deposit yield climbs further despite strong demand for offering

THE BANGKO SENTRAL ng Pilipinas’ (BSP) term deposits fetched a slightly higher average yield on Wednesday, marking the fifth straight week of increase despite investor demand holding strong.

Bids for the term deposit facility (TDF) amounted to P138.544 billion, exceeding the P90 billion in seven-day papers placed on the auction block but below the P146.465 billion in tenders recorded for the same volume auctioned off last week.

This was equivalent to a bid-to-cover ratio of 1.5394 times, lower than the 1.6274 ratio in the previous auction.

Still, the central bank made a full award of its offer.

Accepted yields for the one-week papers were from 4% to 4.482%, a tad narrower versus the 4% to 4.4888% margin logged a week ago. With this, the average accepted rate climbed by 0.5 basis point week on week to 4.4432% from 4.4382%.

The central bank uses the TDF and BSP bills to mop up excess liquidity in the financial system and better guide market yields towards its policy rate.

The BSP last auctioned off both the seven-day and 14-day deposits on Oct. 29. Meanwhile, it has not offered 28-day term deposits for over five years to give way to its weekly offerings of securities with the same tenor.

In its latest Monetary Policy Report, the central bank said it limited its TDF offerings to a single tenor to rationalize liquidity operations and focus on tenors that would boost monetary policy transmission.

As of mid-February, the BSP’s market operations have absorbed P1.2 trillion in excess liquidity from the market, with 9% of this being siphoned off via the TDF. — Katherine K. Chan