YIELDS on the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) ended mixed on Wednesday due to weak demand, with both tenors going undersubscribed as market liquidity was affected by the government’s recently concluded offering of retail Treasury bonds (RTB).
The central bank’s term deposit facility (TDF) fetched bids amounting to just P71.36 billion, well below the P100 billion placed on the auction block as well as the P117.295 billion in demand for the P190-billion offer in the previous week. The BSP accepted all the submitted tenders for both tenors.
Broken down, bids for the one-week papers stood at only P32.985 billion, lower than the P50-billion offer and the P60.19 billion in tenders recorded for the P140-billion placed on the auction block last week.
Banks asked for rates ranging from 5.235% to 5.27%, steady from the week prior. However, the weighted average accepted yield for the seven-day deposits inched up by 0.33 basis point (bp) to 5.2557% from 5.2524% a week ago.
Meanwhile, the two-week deposits attracted P38.375 billion in bids, also below the P50 billion offered by the central bank and the P57.105 billion in tenders recorded for the same volume auctioned off last week.
Accepted yields ranged from 5.26% to 5.2899%, narrower than the 5.2575% to 5.29% margin recorded a week earlier. This caused the average rate for the 14-day papers to go down by 0.66 bp to 5.2754% from 5.282% previously.
The BSP has not auctioned off 28-day term deposits for nearly five years to give way to its weekly offerings of securities with the same tenor.
Both the TDF and BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates towards the policy rate.
“At the Aug. 20 TDF auction, yields were little changed from the previous week,” the BSP said in a statement.
This came even as both tenors were undersubscribed despite the central bank reducing its total offer volume this week.
“The resulting bid-to-cover ratios were 0.66 times for the seven-day tenor and 0.77 times for the 14-day tenor,” the central bank said.
TDF yields were mixed as “the latest RTB offering effectively siphoned off some of the excess peso liquidity from the financial system and could have somewhat sapped future demand for Treasury bills, Treasury bonds, and BSP TDF auctions in the near term since some investors already invested beforehand,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The government raised a total of P507.16 billion via its offering of five-year RTBs that ran from Aug. 5-15, well above the P30-billion target, amid strong demand from retail investors.
Broken down, it raised P425.5 billion in new money, while the remaining P81.65 billion came from the bond exchange component of the offer.
The government raised an initial P210 billion from the RTBs at the rate-setting auction held on Aug. 5. The notes are priced at 6% per annum, payable quarterly.
Mr. Ricafort added that expectations of a third straight BSP rate cut at the Monetary Board’s policy meeting next week also affected TDF yield movements. — Katherine K. Chan