Yields on term deposits mixed on lockdowns, Powell remarks

YIELDS ON THE central bank’s term deposits were mixed on Wednesday as the government proposed to put parts of the country under granular lockdowns and following dovish comments from the US Federal Reserve chief last week.

Total bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P618.294 billion on Wednesday, above the P570 billion on offer as well as the P593.589 billion in tenders recorded at last week’s auction.

Broken down, demand for the seven-day term deposits reached P232.835 billion, higher than the P150 billion auctioned off by the BSP and also beating the P169.137 billion in tenders last week.

Accepted rates for the tenor ranged from 1.675% to 1.7393%, slimmer than the 1.675% to 2.012% band in the previous week’s auction. This caused the average rate of the paper to slip by 0.86 basis point (bp) to 1.7121% from 1.7207% previously.

Meanwhile, the 14-day deposits fetched bids amounting to P385.459 billion, below the P420 billion on the auction block as well as the P424.452 billion in tenders logged in the previous week’s offering.

Lenders asked for yields ranging from 1.7% to 2.21%, picking up from the 1.6995% to 1.75% margin seen last week. With this, the average rate of the two-week deposits inched up by 2.14 bps to 1.7381% from 1.7167% in the previous auction.

The BSP did not offer 28-day term deposits for the 45th consecutive auction to give way to its weekly offerings of bills with the same tenor.

The term deposits and the 28-day bills are used by the BSP to gather excess liquidity in the financial system and to better guide market rates.

Yields on the term deposits were mixed on Wednesday as the government said it could impose granular lockdowns instead of city- and province-wide quarantine measures amid the continued surge in coronavirus disease 2019 (COVID-19) infections, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Interior Undersecretary Jonathan E. Malaya told a televised briefing on Wednesday that the shift to two-week granular lockdowns in high-risk areas is up “for final approval” of the government’s interagency task force for the pandemic. These lockdowns will be limited to a building, street or barangay that record rising cases, officials earlier said.

Local government officials of Antipolo and Muntinlupa have already imposed granular lockdowns in their areas to curb the spread of the virus. Meanwhile, Metro Manila is under modified enhanced community quarantine until Sept. 7.

The highly infectious Delta variant is now the dominant variant of COVID-19 in the country, the World Health Organization said on Tuesday.

COVID-19 infections rose by 13,827 on Tuesday to bring active cases to 145,562.

Meanwhile, Mr. Ricafort added that dovish signals from the Fed during its Jackson Hole symposium last week also continued to affect market sentiment.

Fed Chairman Jerome Powell on Friday signaled that they are not in a hurry to hike interest rates. He also did not hint on a specific timing for their plan to taper asset purchases, although he said they could start by this year. —