Yields on BSP’s term deposits inch lower before Fed decision

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday ahead of the US Federal Reserve’s announcement of its policy decision overnight.

The BSP’s term deposit facility (TDF) attracted bids amounting to P275.772 billion on Wednesday, below the P310 billion on the auction block as well as the P338.589 billion seen a week ago for a P400-billion offer.

Broken down, tenders for the seven-day papers reached P164.612 billion, lower than the P170 billion auctioned off by the central bank and the P182.415 billion in bids for a P200-billion offer seen the previous week.

Banks asked for yields ranging from 6.52% to 6.57%, slightly wider than the 6.53% to 6.57% band seen a week ago.

The average rate of the oneweek deposits declined by 0.29 basis point (bp) to 6.5587% from 6.5616% previously.

Meanwhile, bids for the 14day term deposits amounted to P111.16 billion, below the P140billion offering and the P156.174 billion in tenders for the P200billion offer a week ago.

Accepted rates were from 6.58% to 6.61%, a tad narrower than the 6.579% to 6.615% margin recorded a week ago. With this, the average rate for the two-week deposits inched down to 6.5914% from the 6.5915% logged in the prior auction.

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 term deposits and the 28day bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields went down on Wednesday in anticipation of the US central bank’s policy decision, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The markets would be anticipating the upcoming Fed ratesetting meeting and decision, as well as the updated Fed dot plot, as source of new market leads,” Mr. Ricafort said.

The Fed was set to announce overnight its policy decision after a two-day meeting on March 19-20.

The Federal Open Market Committee raised rates by 525 bps from March 2022 to July 2023 to bring the target fed funds rate to 5.25-5.5%. —