Yields on BSP’s term deposits climb further despite demand

YIELDS ON term deposits rose further this week as market players put forward higher bids to match the bigger offerings of the central bank.

Bids for short-term placements totalled P95.901 billion, improving from the P81.663 billion received the previous week to settle just above the P100 billion the Bangko Sentral ng Pilipinas (BSP) offered on Wednesday.

Appetite improved across the board after the auction amount was raised from P70 billion previously, although the longer tenors remained undersubscribed.

Demand for the seven-day instruments grew to P50.17 billion from the P44.325 billion received a week prior and filling the P50 billion which the BSP placed on the auction block.

Banks also wanted higher returns and asked for rates between 4.72% to as much as 5%, which pushed the average yield higher to 4.7442% from 4.7249%.

The 14-day deposits also received greater attention as players tendered P29.563 billion, up from P23.425 billion last week. This, however, remained below the P30-billion offering.

Banks also asked for bigger margins at an average of 4.789%, coming from the 4.7631% rate during the Oct. 31 exercise.

Offers for the 28-day notes also climbed to P16.168 billion from P13.913 billion previously, but failed to fill the P20 billion offered by the central bank. Yields also climbed to 4.901%, up from last week’s 4.8798% average.

The TDF has been the central bank’s main tool to capture excess liquidity and influence short-term rates in the financial system. Through the weekly auctions, the BSP can bring market and interbank closer to its desired range by setting the standard for short-term instruments using the margins that they pay to banks for these placements.

The stronger demand comes ahead of another rate-setting meeting of the BSP next Thursday, which will follow four straight hikes worth a total of 150 basis points (bp). Analysts are expecting another 25-bp hike from the BSP, softer compared to the back-to-back 50-bp increase in August and September amid signs of easing inflation.

Another rate hike from the BSP would also push TDF yields as well as market rates imposed by banks on their loan and deposit instruments.

The central bank trimmed term deposit offerings to P90 billion for next week, split into P50 billion for the one-week papers and P20 billion each for the 14and 28-day tenors.