Investors gobble up P130-B term deposits

Fed rate hike, Trump presidency causing jitters

MANILA, Philippines – Term deposits continued to fetch higher yields due to the uncertainties brought about by the impending interest rate hike in the US next month and the assumption into office of US president-elect Donald Trump early next year.

The seven- and 28-day term deposits fetched higher rates yesterday ahead of the increase in the volume of the term deposit facility (TDF) to be implemented by the Bangko Sentral ng Pilipinas (BSP) on Dec. 1.

During yesterday’s auction, the seven-day term deposits fetched 2.5249 percent from last week’s 2.5232 percent as accepted yield ranged between 2.5 and 2.5313 percent while yield of the 28-day term deposits inched up to 2.8023 percent from 2.7842 percent as accepted yield ranged from 2.5 to 2.95 percent.

BSP Governor Amando Tetangco Jr. said the auction results were expected.

Bids for the seven-day term deposits reached P22.79 billion for a lower bid coverage ratio of 2.279 while tenders for the 28-day term deposits amounted to P150.55 billion for a lower bid coverage ratio of 1.2546.

“The bid to cover ratio changes are beginning to reflect seasonality given these tenors would mature close to the holidays,” Tetangco said.

Business ( Article MRec ), pagematch: 1, sectionmatch: 1

The BSP made a full award of P10 billion for the seven-day term deposits and P120 billion for the 28-day term deposits yesterday.

Starting next month, the BSP is set to auction P180 billion worth of term deposits from the current level of P120 billion. This would consist of P30 billion worth of seven-day term deposits and P150 billion worth of 28-day term deposits.

The central bank has raised the size of the weekly auction of seven- and 28- day term deposits six times since the facility was launched last June 8 with an original size of P30 billion.

The size was raised to P50 billion last July 7, to P70 billion last Aug. 3, to P90 billion last Aug. 31, to P110 billion last Oct. 5, to P130 billion last Nov. 2, and to P180 billion starting Dec. 1.

The BSP launched the TDF as part of the shift to the interest rate corridor system last June 8 as one of the facilities to mop up excess liquidity in the financial system.

The IRC aims to bring market rates closer to the policy rates.

Last June 3, the BSP slashed the overnight lending rate (formerly overnight borrowing rate) to 3.5 percent from six percent as well as the overnight reverse repurchase rate (formerly overnight lending rate) to three percent from four percent as part of the operational adjustment.

The yield of the overnight deposit facility (ODF) – formerly special deposit account (SDA) facility – was retained at 2.5 percent.

There is a rationalization of interest rates amid the continued migration of funds parked at the ODF to the TDF that could pave the way for the possible reduction of the reserve requirement ratio of banks currently pegged at 20 percent.

“We will continue to closely monitor market liquidity conditions to make sure this is sufficient as we approach the holiday season,” Tetangco said.