Term deposit yields inch lower on strong demand

YIELDS ON THE central bank’s term deposits slipped on Wednesday as oil prices inched down and amid demand for safe-haven assets due to concerns over the highly infectious Delta variant of the coronavirus disease 2019 (COVID-19).

Tenders for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P741.811 billion on Wednesday, higher than the P560-billion offer and also surpassing the P741.224 billion in bids last week.

Broken down, demand for the seven-day papers hit P230.57 billion, beyond the P160 billion auctioned off by the BSP as well as the P215.972 billion in tenders seen in the previous offering.

Accepted rates for the tenor ranged from 1.65% to 1.7075%, lower than the 1.7% to 1.7175% margin seen a week ago. This caused the average rate of the one-week term deposits to slip by 1.05 basis points (bps) to 1.6992% from 1.7097% in the previous week’s auction.

Meanwhile, the two-week deposits fetched bids amounting to P511.241 billion, higher than the P400-billion offer but failing to beat the P525.252 billion in tenders recorded a week ago.

Banks asked for yields ranging from 1.7295% to 1.779%, dropping from the 1.75% to 1.7975% band logged last week. With this, the average rate for the 14-day tenor decreased by 1.63 bps to 1.7654% from 1.7817% quoted previously.

The central bank did not offer 28-day term deposits for the 39th straight week to give way to its weekly offerings of bills with the same tenor.

The BSP uses the TDF and its short-term bills to mop up excess liquidity in the financial system and to better guide market rates.

“The results of the TDF auction continue to reflect normal market conditions amid sustained ample liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, meanwhile, attributed the lower term deposit yields to improved sentiment on the back of a decline in global oil prices.

Reuters reported that oil prices went down on Wednesday following data which showed an unexpected buildup in US oil inventories the previous week.

Brent crude futures on Wednesday was down by 0.5% or 36 cents to $68.98 a barrel as of 0627 GMT following a 1.1% increase on Monday. Meanwhile, US West Texas Intermediate

crude futures declined by 0.5% or 36 cents to $66.84 per barrel after a $1 increase on Tuesday.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion attributed the lower TDF yields to higher demand as investors are looking to park their funds in safe assets due to concerns over the highly infectious Delta variant of COVID-19.

“It’s a rush to safer opportunities that eventually caused lower yields as demand increased,” Mr. Asuncion said in a Viber message.

The Health department last week reported that cases of the Delta variant of COVID-19 in the country stood at 35. Of these, 11 were locally acquired, while five were cases from returning overseas Filipinos. Eight of these cases are active while three have died. — L.W.T. Noble