Banks and trust entities would not be stampeded into holding far more Bangko Sentral ng Pilipinas (BSP) deposit slips than they have to till after the fluid conditions across markets have crystallized.
This came across clearly again on Wednesday at auction exercises in which the market showed “clear market preference” for short-dated deposit terms as concerns over lingering uncertainties hound the industry.
Results posted on the central bank’s web site show the banks and trust entities preferring term deposits with the short rather than long tenor and best indicated by seven-day term deposits, or TDs, swamped by oversubscription even as 28-day TDs remain undersubscribed.
In particular, the amount tendered for seven-day TDs amounted to P55.3 billion on Wednesday, covering 138 percent of the P40 billion offered during the week.
This was a contrast to P127.03 billion tendered for the 28-day TDs, covering only 91 percent of the total offered for the week of P140 million.
The yield of the twin tenors also proved widely divergent as short-dated TDs fell slightly during the week, from 3.2756 percent to 3.2468 percent on Wednesday.
Twenty eight-day TD yield was slightly up from 3.461 percent last week to 3.4764 percent on Wednesday.
BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo earlier said the
underwhelming subscription may be best explained by the caution gripping markets.
“There’s still a lot of uncertainty in the market, uncertainty in the sense that anytime the US Federal Reserve can choose to do a third or even a fourth adjustment in the policy rate,” Guinigundo said.
“And if you are holding a longer term instrument you’ll be locked in to that instrument. So the market basically prefers to go short term instead of going into 28-days. I think they have more flexibility,” he quickly added.
The BSP kept the volume of offering at P40 billion for the seven-day TDs and at P140 billion for the 28-day TDs until May 24.