THE P180 billion worth of term deposits offered by Bangko Sentral ng Pilipinas on Wednesday was undersubscribed by almost P20 billion due to investors’ weak demand for the month-long instruments that offset the strong appetite for week-long deposits.
Data showed that total tenders for the weekly auction reached P160.37 billion, or P19.63 billion short of the weekly volume of P180 billion.
The seven-day deposits worth P40 billion lured total tenders of P64.7 billion and fetched a weighted average accepted yield of 3.06 percent. The month-long deposits worth P140 billion, meanwhile, attracted total bids of just P95.67 billion and had a weighted average accepted yield of 3.48 percent.
Bangko Sentral made a full award of the weekly volume of P40 billion for the seven-day deposits, but awarded just P95.27 billion of the total tender of P95.67 billion for the 28-day instruments.
“The auction results show banks’ continued preference to stay at the shorter end of the curve in anticipation of the Fed meeting this week, with the oversubscription of the 7-day term deposits,” Bangko Sentral Governor Amando Tetangco Jr. said in a statement sent to reporters.
“Demand for the 28-day term deposits, however, decreased due to the non-participation of trust units as the June 30 deadline nears. Overall system liquidity appears adequate,” Tetangco said.
The US Federal Reserve is widely seen to increase interest rates this week. The last time it raised rates was in early March 2017.
Bangko Sentral officials earlier noted a strong demand for the week-long instruments as banks found their relatively high rate more attractive.
They cited the successful issuance of retail treasury bonds by the Bureau of the Treasury recently as the main reason for investors’ less appetite for the month-long term deposits.
The Bureau of the Treasury in April raised P175 billion from its latest issuance of three-year retail treasury bonds, including those generated from roadshows conducted nationwide.
Tetangco also cited reports that banks were setting aside funds for their reserve requirement compliance.
Previous over-subscriptions in 2016 prompted the regulator to increase by P50 billion the weekly volume from the previous P130 billion to P180 billion starting Dec. 1, 2016 to more effectively siphon off excess liquidity in the financial system.
The amount of week-long deposits was increased by P20 billion to P30 billion from P10 billion, while the month-long deposits were raised by P30 billion to P150 billion from P120 billion.
The adjustment on Dec. 1 was the sixth time that Bangko Sentral increased the volume. From the original volume of P30 billion, it was raised to P50 billion, P70 billion, P90 billion, P110 billion and P130 billion.
