The various lenders would rather spend their money on government securities (GS) than invest them on term deposits offered by the Bangko Sentral ng Pilipinas (BSP).
This was obvious in latest results from the Central Bank’s term-deposit facility (TDF) auction on Wednesday when both the short- and long-term tenors attracted far less interest than expected.
In particular, tenders by banks and trust entities on seven-day TDFs hit P35.05 billion, covering only 87.63 percent of the P40-billion offering.
On 28-day TDFs, the total tendered hit P106.19 billion, covering only 75.85 percent of the P140 billion offered for the week.
The deposit rates were exact opposites of the other, with the shorter-tenor TDF posting higher rates for the week at 3.308 percent, from the 3.2597 percent in the previous week and the 28-day rate slightly down 3.4929 percent this week, from the 3.4948 percent in the week previous.
“TDF results continue to demonstrate that one, banks have been funding more loans and investment in government securities and two, short-dated placements are preferred by the market,” Central Bank Deputy Governor Diwa C. Guinigundo told reporters Wednesday.
“This is after all expected by the BSP because we want excess funds of the banks to be channeled to financing productive economic activities, including infrastructures,” the BSP official added.
Guinigundo further said the BSP will “continue to assess” the various features of the interest rate corridor, including the volume of its weekly auction.
Currently, the BSP offers P40 billion for its 70-day TDF and P140 billion for the 28-day TDF. The volumes were in place since May this year.