Term deposit rates ease further

MANILA, Philippines — Term deposit rates eased across the board anew, as investors anticipate more interest rate cuts amid the impact of the coronavirus disease-2019 (COVID-19), according to the Bangko Sentral ng Pilipinas (BSP).

The yield of the seven-day term deposits slipped by 0.51 basis point to 3.8250 percent at the term deposit auction facility (TDF) yesterday from last week’s 3.8301 percent, while rate for the 14-day tenor declined by 1.05 basis points to 3.8654 percent from 3.8759 percent.

Likewise, the 28-day term deposits fetched a lower rate of 3.8918 percent yesterday or 0.66 basis point less than last week’s 3.8984 percent.

Banks continued to park their excess funds in the liquidity absorption facility with tenders reaching P173.66 billion versus the issue size of P130 billion.

Bids for the seven-day term deposits amounted to P50.26 billion as against the P40-billion offering, while tenders for the 14-day tenor reached P69.91 billion compared to the P50-billion volume.

The 28-day tenor was also oversubscribed as banks tendered P53.49 billion, higher than the P40-billion offering.

BSP Deputy Governor Francisco Dakila Jr. said earlier liquidity in the financial system tightened after the retail treasury bond (RTB) offering of the Bureau of Treasury (BTr) siphoned off funds in the market.

The government raised a record P310.8 billion as small investors gobbled up the three-year RTBs issued early this month. The amount exceeded the P255.5 billion RTBs sold in 2017.

The central bank’s Monetary Board slashed the level of deposits banks are required to keep with the BSP last year as part of the commitment of BSP Governor Benjamin Diokno to bring it down to single-digit by the middle of 2023.

The regulator lowered the reserve requirement ratio for big and mid-sized banks by 400 basis points and for small banks by 200 basis points, freeing up about P450 billion to boost economic activity.

However, the BSP noted the slow uptake in loans prompting banks to park additional funds to various central bank facilities including term deposits.

Last Feb. 6, the Monetary Board resumed its easing cycle, slashing interest rates by 25 basis points as a preemptive move to support market confidence and to provide additional policy support to ward off the potential spillovers associated with increased external headwinds including the virus outbreak.

The central bank has slashed interest rates by 100 basis points since May last year amid the benign inflation environment as well as slower than expected gross domestic product growth.

Economists see more rate cuts amid the benign inflation environment as well as the impact of the COVID-19 outbreak on global economic growth.