None of the banks and financial institutions wanted to part with their funds longer than a week on Wednesday when the Bangko Sentral ng Pilipinas (BSP) opened up for subscription up to only P40 billion worth of seven-day term deposits.
This was a decision the monetary authorities would not live to regret as bids for the facility proved more than triple that number to P127 billion instead, and a validation of the reluctance of the local financial community to go long haul at the moment.
This developed just a day after the Bureau of the Treasury thwarted an attempt by government securities eligible dealers or GSEDs to turbo charge the 10-year bond rate to as high as 6.5 percent.
National Treasurer Rosalia V. de Leon would have none of that, of course, and rejected all P18.7 billion worth of bids that fell short of the P20 billion the Treasury needed to make an award anyway.
Were the government desperate for money, the 10-year rate would have rocketed 54.6 basis points higher to 5.461 percent, the Treasury said on Tuesday.
All these point to the inescapable conclusion the financial community have their eyes clearly on the US Federal Reserve whose anticipated interest-rate adjustment, the first of three such adjustments expected this year, was seen happening over the short horizon.
The high demand for shorter-term term deposits pushed rates lower during the week, as the weighted average accepted yield hit 3.223 percent, from the 3.3654 percent in the previous week.
The oversubscription also compares higher than the oversubscription on January 3, when the bids aggregated P95.55 billion.
This is as the BSP opted not to open its 28-day special deposit window in the wake of persistent undersubscription.
Earlier this year, BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo said they zeroed out the 28-day window because “banks have alternative use for their money, instead of just putting them here with the BSP.”
The Central Bank has not offered the 28-day term deposit facility (TDF) for four consecutive weeks already.
In its latest auction schedule, the BSP also said it was zeroing out yet again the 28-day TDF at next week’s auction, January 24.
Guinigundo added said the BSP is also exploring the idea of another special deposit window—one between the current short- and long-term TDF.
“Based on our initial discussion with the banks—these are initial, preliminary discussions—they prefer a third tenor, probably a cross.