Financial institutions shied away from the central bank’s short term borrowing window on Wednesday with many betting they get better returns on their funds after Thursday’s Monetary Board meeting where a rate hike is expected.
Because of this, the weekly term deposit facility (TDF) auction of the Bangko Sentral ng Pilipinas was undersubscribed for the second week in a row.
“Everyone is betting on a rate hike [on Thursday] so there’s no rush to use the TDF for the longer dated tenors,” a bank treasurer said.
During Wednesday’s auction, financial institutions pushed interest rates higher on the seven-, 14- and 28-day instruments despite weak demand for the last two tenors.
The total volume for the entire TDF auction was reduced further by the central bank to P60 billion this week from P70 billion last week in anticipation of the diminished interest from banks.
The yield on the seven-day term deposit facility rose to 4.4215 percent from the previous week’s 4.3884 percent. Banks tendered P51.6 billion worth of bids for the P40 billion on offer, with the central bank making a full award of P40 billion.