YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits slipped on Wednesday as they went undersubscribed after the government raised a record amount from its retail Treasury bond (RTB) offering, resulting in decreased market liquidity.
Demand for the central bank’s term deposit facility (TDF) hit P190.891 billion on Wednesday, lower than the P210 billion on the auction block. It was also below the P342.737 billion in bids seen last week for P310 billion on offer.
Tenders for the one-week term deposits reached P115.931 billion, failing to meet the P120-billion offer as well as the P235.287 billion in bids for a P180-billion offer in the previous auction.
Banks asked for yields ranging from 6.51% to 6.85%, wider than the 6.5% to 6.5835% band seen on Feb. 21. The average rate for the seven-day debt dipped by 1.06 basis points (bps) to 6.565% from 6.5756% the previous week.
Meanwhile, the 14-day deposits attracted P74.96 billion in bids, also lower than the P90 billion sold by the central bank and the P107.450 billion in tenders seen for the P130-billion offering last week.
Accepted rates for the two-week debt ranged from 6.575% to 6.625%, a tad wider than the 6.58% to 6.625% seen last week. This caused the tenor’s average rate to inch down by 0.93 bp to 6.5948% from 6.6041% previously.
The BSP has not auctioned off 28-day term deposits for more than three years to give way to its weekly offerings of securities with the same tenor.
The central bank term deposits and 28-day bills are used to mop up excess liquidity in the financial system and to better guide market rates.
Yields on the term deposits slipped following the government’s record-high RTB issuance, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
The government raised a record P584.86 billion from its offering of five-year RTBs, exceeding the Bureau of the Treasury’s (BTr) P400-billion target. The bonds were settled on Wednesday.
The government initially raised P212.719 billion through the RTB 30 during the rate-setting auction.
It raised an additional P372.14 billion during the nine-day public offer period. Of this amount, the government raised P243.45 billion from the bond switch program, while P128.69 billion came from new money.
The five-year RTBs fetched a coupon rate of 6.25%, 12.5 bps higher than the 6.125% quoted for the five-and-a-half-year RTBs offered in February 2023, but was lower than the government’s expectations.
Mr. Ricafort said the record-high RTB issue could “mop up some of the excess peso liquidity in the financial system for the meantime and could lead to some increase in the supply of government securities in the market.”
It also gives the government greater flexibility to accept or reject high bid yields at its auctions, he added.
The government’s borrowing program for this year is set at P2.4 trillion, with P1.85 trillion to be raised from the domestic market and P606.85 billion from foreign sources.
It borrows to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year or P1.39 trillion. — Keisha B. Ta-asan
