Yields on term deposits inch up ahead of inflation data, BSP meet

YIELDS ON term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) mostly rose on Wednesday, with the market expecting a slightly faster increase in commodity prices.

Tenders for the BSP’s term deposit facility (TDF) amounted to P645.18 billion on Wednesday, higher than the P390 billion on the auction block. It also went beyond last week’s P575.31 billion worth of bids for a P390-billion offering.

Broken down, the seven- day papers attracted bids worth P251.53 billion, above the P180billion offering but less than the P262.56 billion in tenders logged on Sept. 23.

Accepted rates for the tenor ranged from 1.82% to 1.86%, a slimmer margin compared with the 1.8% to 1.87% recorded in the previous auction. With this, the average rate for the paper stood at 1.8377%, increasing by 0.31 basis point ( bp) from the 1.8346% seen a week ago.

Meanwhile, the 14- day papers were met with bids totaling P297.14 billion, well beyond the P200 billion on offer as well as the P253.87 billion in tenders last week versus the P190 billion on the auction block.

Banks asked for yields within the 1.82% to 1.87% range, a thinner band than the 1.8015% to 1.87% logged a week ago. This brought the average rate of the 14day papers to 1.8485%, decreasing by 0.35 bp from the 1.852% recorded last week.

On the other hand, demand for the one-month deposits totaled P96.51 billion, surpassing the P50 billion on the auction block and the P58.88 billion in tenders seen for the P30-billion offer last week.

Yields on the 28- day term deposits ranged from 1.82% to 1.85%, narrower than the 1.818% to 1.8522% margin seen at last week’s auction. This caused the tenor’s average rate to settle at 1.8426%, rising by 0.1 bp from the 1.8416% seen last week.

The TDF is one of the central bank’s tools to gather excess liquidity in the financial system and to better guide market interest rates.

“The TDF auction results show continued ample liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

BSP Governor Benjamin E. Diokno has said the liquidity infusion from the central bank’s monetary policy measures reached P1.5 trillion, equivalent to about 7.6% of the gross domestic product.

The uptick in the TDF yields came ahead of the release of the September inflation data, said

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“The markets are expecting slightly faster inflation after a full month of GCQ ( general community quarantine) in Metro Manila, leading to some pickup in demand as well as prices of goods and services,” Mr. Ricafort said in a text message.

The Philippine Statistics Authority ( PSA) is set to report the September inflation data on Oct. 6.

Inflation stood at 2.4% in August, easing from the 2.7% pace in July faster than the 1.7% logged in August 2019. The PSA said inflation eased mainly on the back of a slower increase in food prices.

This brought the year-to-date inflation average to 2.5%, within the BSP’s 2-4% target and slower than the 2.6% forecast for the year. —