Yields on BSP’s term deposits drop on virus, lower oil prices
YIELDS ON THE central bank’s term deposit facility (TDF) declined further on Wednesday amid developments in the coronavirus disease 2019 (COVID-19) outbreak and the recent drop in oil prices.
Bids for the term deposits offered by the Bangko Sentral ng Pilipinas (BSP) amounted to P217.39 billion on Wednesday, beyond the P150 billion auctioned off by the central bank and also higher than the P168.216 billion seen the previous week for the P120-billion offer.
Tenders for the seven-day deposits totaled P66.733 billion, surpassing the P50 billion on offer and also beating the P48.697 billion in bids logged on March 4.
Yields for the tenor ranged from 3.7% to 3.8%, down from the 3.75% to 3.85% margin logged last week. This caused the average rate to drop to 3.7557%, down by 2.64 basis points (bps) from last week’s 3.7821%.
For the 14-day term deposits, total bids amounted to P70.844 billion, higher than the P50 billion on offer as well as the P52.454 billion in tenders seen last week for the P40 billion on the auction block.
Banks sought yields ranging from 3.75% to 3.8125%, a slimmer band compared to the 3.765% to 3.85% range seen last week. This brought the average rate to 3.7757%, slipping by 5.45 bps from the 3.8102% seen on March 4.
On the other hand, bids for the one-month term deposits hit P79.813 billion, higher than the P50 billion on offer and also going beyond the P67.065 billion worth of tenders logged last week for a P30-billion offering.
Yields sought by banks for the 28-day tenor ranged from 3.675% to 3.78%, a wider margin compared to the 3.75% to 3.8% seen last week. With this, the average rate for the papers settled at 3.7436%, inching down by 4.24 bps from the 3.786% seen a week ago.
UnionBank of the Philippines, Inc. Chief Economist Ruben
Carlo O. Asuncion attributed the lower yields to weaker investor sentiment caused by the coronavirus disease 2019 (COVID-19) outbreak, as well as tensions caused by the oil price war.
“These lower yields indicate the continuing impact of the COVID-19 and oil price war uncertainties on investor sentiment. The downward pressure on yields is expected to continue as players continue to take on lesser risks,” Mr. Asuncion said in an e-mail.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also said the decline in oil prices may have dragged down yields further.
“The latest decline in TDF auction yields was largely triggered by the sharp decline in global oil prices, to new 4-year lows, thereby could reduce the country’s inflation rate and further increase the odds of a further cut on local policy rates,” Mr. Ricafort said in an e-mail.
Reuters reported that Saudi Arabia on Tuesday announced that it would heighten its oil supplies to a record high in April, raising the stakes in a standoff with Russia and effectively rebuffing Moscow’s suggestion for new talks.
On Monday, oil prices fell by about 30% after Saudi Arabia slashed its selling price in a bid to start a price war with Russia amid falling demand in the market on the back of the COVID-19 outbreak.
The BSP’s Monetary Board will have its second policy-setting meeting on March 19. BSP Governor Benjamin E. Diokno has said the COVID-19 outbreak, the emergency rate cut of the US Federal Reserve last week, as well as the 2.6% headline inflation print in February will be among the factors they will consider in their rate decision.
Rates of the BSP’s overnight deposit, overnight reverse repurchase, and overnight lending facilities are currently at 3.25%, 3.75% and 4.25%, respectively. —