Term deposit rates ease further amid strong demand

MANILA, Philippines — Term deposits fetched lower rates anew as banks continued to swarm the liquidity absorption facility of the Bangko Sentral ng Pilipinas (BSP) amid easing inflation.

The seven-day tenor fetched a lower rate for the fourth straight week to 4.7567 percent yesterday or 1.97 basis points lower than last week’s 4.7764 percent, while the yield of 14-day term deposits slipped 13.59 basis points to 4.7789 percent from 4.9148 percent last April 10.

The term deposit auction facility (TDF) was oversubscribed as bids reached P34.33 billion versus the issue size of P20 billion.

The BSP auction committee is slowly increasing the volume of the TDF with the normalization of the amount of money circulating in the economy. It resumed offering the 14-day tenor but has yet to resume the sale of 28-day term deposits.

Tenders for the seven-day tenor reached P15.02 billion for the P10 billion offering, while bids for the 14-day term deposits reached P19.3 billion versus the issue size of P10 billion.

BSP Deputy Governor Diwa Guinigundo earlier said liquidity is beginning to return to the financial system after temporary tightness due to higher demand for cash on account of the Holy Week, tax season and the coming May election.

Guinigundo said there was some restraint in public spending following the delay in the passage of the 2019 national budget despite the large fund raising exercise of the national government through the Bureau of Treasury (BTr).

Aside from the regular issuance of treasury bills (T-Bills) and Treasury bonds (T-bonds), the government raised P235.9 billion from the sale of five-year retail Treasury bonds (RTBs) last March as it continues to borrow more to finance the ambitious Build Build Build program of the Duterte administration.

Tight liquidity has prompted the BSP auction committee to slash the volume of the TDF to as low as P10 billion for the seven-day tenor last April 17. The BSP has not offered the 28-day tenor since March 27.

Guinigundo had said demand for credit was somehow affected by the BSP’s deliberate policy to tighten monetary policy last year to strengthen inflation management which yielded positive results with the decisive reduction in inflation.