By Lee C. Chipongian
Yields of the two-tenor term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) fell this week on low subscriptions as banks hoard cash ahead of the long Lent holiday next week.
With P30 billion on offer – that is P20 billion for the 7-days and P10 billion for the 14-days – bids reached P50.32 billion which was lower compared to the previous Wednesday’s P63.03 billion.
The 7-day TDF attracted P29.70 billion in tenders compared to P40.46 billion last April 3. Its average rate fell to 4.8943 percent from 4.9333 percent last week.
The 14-day tenor, in the meantime, had bids of P20.62 billion, also lower than last week’s P22.57 billion. Yields were down to 4.9148 percent from 4.9969 percent.
BSP Deputy Governor Diwa C. Guinigundo said that they will continue to make adjustments to the TDF – such as in removing the longer dated 28-day tenor – to tune in to the market’s appetite.
The last time the 28-day TDF was in the weekly auction was March 20, at P10 billion.
As previously explained by Guinigundo, one of the reasons they decided to sideline the 28-day tenor was because the National Government’s own offering of retail treasury bonds worth P235 billion has already mopped up liquidity from the market, which is what the BSP’s auction-based open market operation was doing in the first place, to siphon off excess liquidity in the financial system.
He said that since the government is spending capital for infrastructure development, liquidity is being taken out of the BSP and into the markets such as banks.
Also, with Holy Week just a week away, banks are keeping their cash close since bank clients usually have a higher demand for cash during Lent season.