Cash-rich financial institutions bid aggressively on Wednesday for the right to lodge their funds in short-term securities of the Bangko Sentral ng Pilipinas (BSP), marking the third week that the regulator’s term deposit facility (TDF) auction was oversubscribed.
Data from the BSP showed that banks submitted a total of P128.6 billion worth of bids for the combined P100 billion of one-, two- and four-week deposits offered. As a result, yields of these instruments have begun to taper off from their sustained uptrend over the last three months.
One bank treasurer, asking that his name be withheld, opined that the renewed interest in short-term deposit instruments was partly due to expectations of higher inflation in the next few months—a phenomenon that traditionally results in higher interest rates, as well.
“Bankers know that interest rates will still be going up, so very few are willing to put their money in long-term instruments right now,” he said, explaining the attractiveness of the BSP’s short-term deposits. “That’s why everyone is heading to TDFs these last few weeks.”
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During yesterday’s auction, banks submitted P47.3 billion worth of bids for the P40 billion on offer for the seven-day term deposit instrument. The central bank accepted a total of P40 billion worth at an average yield of 3.7586 percent, marginally higher than the previous week’s 3.7537 percent, but lower than the 3.7779 percent yield from two weeks ago.
For the 14-day instrument, banks submitted P57.4 billion worth of bids for the P40 billion on offer. The central bank accepted P40 billion with an average yield of 3.9220 percent. This was slightly lower than last week’s 3.9258-percent yield, and also lower than the 3.9309 percent from two weeks ago.
